Income tax is normally an overall tax imposed on the
total income of an individual during a given year. Barring
exceptions, all income, regardless of its origin, is
aggregated to determine an overall net income to which
a single tax applies.
This scale has progressive income brackets. However,
the computation method of income tax goes together with
many provisions allowing for highly personalised taxation.
Moreover, certain types of income and capital gains
derived from transferable securities and subjected to
proportional tax levies.
Income tax is assessed once a year on the taxable income,
which a tax household derives during a given calendar
year and declared the following year.
The revenue expected from income tax for 2000 was € 51.5 billion (the total net State
revenue in 2000 was € 220.5 billion).
The net amount of taxable income for income generated
in France is determined by deducting from the gross
amount paid, the mandatory social contributions and
the expenses inherent to duty or employment when the
employee is working [a detail of the process is described
below, but you can jump
directly to the bottom for more practicable explanations].
Rules governing the taxation
Expenses incurred to acquire the earned income are
normally taken into account notionally (a 10% deduction
capped, the further lump sum deduction regime is abolished
as of 1 January 2001). However, taxpayers may opt for
a deduction of their actual professional expenses. Moreover,
a 20% relief is applied to all earned
income, salaries and pensions, but it is abolished
beyond a certain limit.
Computation a tax
The authorities compute income tax on the basis of
the amount declared by the taxpayer who must file
a tax return (received in February and to be completed
before mid-March) reporting total income received
the previous year by the tax household. Although
the scale (the scale is appended) was simplified recently,
computation of income tax remains relatively complex
given the methods implemented to take into account the
taxpayer’s personal situation. Such personalisation
of tax is particularly expressed in the use of the “quotient
familial” technique (income splitting system) on the
one hand and in the attribution of tax reductions to
taxpayers in respect of some of their personal expenses
on the other hand (mainly their family situation – i.e.
number of supported people at home).
The method consists in dividing the
taxable income of the tax household in a number of equal
parts (e.g. one part for a single person, two parts
for a married couple, an additional half part for each
of the first two dependent children and an additional
part for each dependent child thereafter). Next,
the progressive tax scale is applied to the taxable
income per part (split income) thus obtained. Lastly,
this partial tax is multiplied by the number of parts
in order to determine the gross tax payable.
After determining gross tax, any tax
reductions and tax credits for which the taxpayer
may be eligible are granted, where appropriate. Tax
reductions are aimed at certain personal expenses paid
by the taxpayer, which the lawmaker wishes to support,
particularly for social or economic reasons. The granted
reduction corresponds to a given percentage of the expense,
up to a limit. The tax benefit from the reduction of
tax remains thus independent from the amount of income
of the taxpayer concerned (expenses
connected with the main home, donations to charities,
the costs of child-minding, costs of domestic work,
subscription to the capital of unlisted companies, etc).
Deductible tax credits correspond particularly to dividend
tax credits (avoirs fiscaux) pertaining to dividends
distributed by French companies.
Several months after the taxpayer has filed his return,
a bill of net tax in the form of a tax notice (avis
d'imposition) is sent to him or her, indicating also
the date of recovery proceedings (date de mise en recouvrement).
A 10% fine of the amount of tax payable
if payment of the tax owed is delayed.
Normally, tax is paid in the form
of two instalments (February and May) followed
by payment of the balance (September).
Taxpayers may opt for monthly payment of tax. Payment
is made in the form of monthly orders (equal to one-tenth
of the tax paid the previous year) from January to October,
and the balance, if any, is paid during the last month
or two.
In practice
It is mandatory to complete a tax form, even if you
don’t have any tax to pay. You will get the form in
February – to be completed and sent
by mid-March. If you don’t get anything, you
must contact your tax office before the deadline (check
the yellow pages for Hôtel des Impôts – Paris).
An example of a taxpayer form is available: form
#2042
(you need Acrobat
Reader to display the document). After the explanation
below, you may feel a bit threatened by the tax declaration
in France. In practice, however, you will only have
to complete a part of the tax return:
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