You may be planning to settle in France or you might already live in France: you will then be considered as a “French tax resident”.
In this blog post, I will help you to get an insight into the French tax system.
You might have heard that the level of taxation in France is high compared to other countries in Europe. It is not really the case, and moreover, there are ways to act in order to lower your tax liabilities. We recommend that you consult a French Financial Advisor who will guide you in this process (which process? The following process?).
Are you a ‘French tax resident’?
First, you need to know if you are or will be considered as a “tax resident” in France.
The answer is YES, if you meet one of the following conditions:
- your main home is in France
- you spend more than 183 days in France during the calendar year (French fiscal year)
- you spend more time in France than any other country
- your main activity is located in France
- your most important assets are owned in France
If one of the conditions above is fulfilled, you will be liable to pay your income tax in France for your worldwide income.
The French tax system
You will find below an overview of the main kinds of personal tax (not sure it can be plural at all) in France in 2018:
In France, the income tax, is based on the household (foyer) income and not your personal one. It also means, that married or PACS couple with children will be likely to pay less income tax than individuals.
You will have to include in your yearly tax return: salaries of the household, pensions, investment income, interest on savings, rental income, and foreign income (same income and interest is not ever plural or not that I know of).
Regarding foreign income, when tax convention agreements exist, they will define which country has taxing rights over your income, and, if they both have such rights, which one takes priority.
Here is the link to the France and UK Tax treaty
There are five tax rates and bands on net taxable income in France:
|Net taxable income Share|
|Up to 9 807 €|
|From 9 807 € to 27 086 €|
|From 27 086 € to 72 617 €|
|From 72 617 € to 153 783 €|
|Over 153 783 €|
Until 2018, France was one of the few western countries that did not impose tax on the current year.
From January 1st 2019, the pay-as-you-earn system will be deployed for French salaries, pensions and French property income. Your employer will collect the monthly withholding tax on your net salary, but you will still be responsible for: completing your French tax return each year (May/June), defining your tax rate, and if necessary, paying each year the difference between the amount deducted from your monthly income and the final amount mentioned in your annual tax summary.
In order to respect your privacy, you will have the possibility to opt for a non-personalised tax rate that you will share with your employer.
You should also add social charges (between 9,7% and 17,2%) according to the nature of your income (Pensions, Salaries, Investments gains, Capital gains, Rents, etc.)
Wealth Tax : IFI – Impôt sur la Fortune Immobilière
As a French tax resident, you are liable to an annual wealth tax based on the value of your household’s worldwide assets. However, during the first five years of being a French tax resident, only your French assets will be taxed in France.
No tax is due if your total net wealth is under 1,3 million euros. Above this value, you will have to pay wealth tax for your assets over 800 000 euros. The rates range between 0.5% to 1,5% depending on the value of your taxable assets. A tax ceiling has been put in place to lower the tax pressure: your total taxation could not exceed 75% of your total income.
Local residence tax: Taxe d’habitation
This annual tax is due by the occupier of any residence whether it is rented or owned. The tax is due if you are resident on the 1st of January each new year.
Property tax: Taxe foncière
Property owners owe an annual property tax whether they occupy their property or not. The tax level depends on the average rental cost of the city where you own the property and the percentage of taxation fixed by your municipality.
These taxes are the main ones, but other taxes exist: such as the TV licences tax, which amounts currently to 138 € per household, the inheritance tax, the capital gains tax, etc.
We know that the French tax system is complicated!
Therefore, we recommend you go through your tax and wealth management planning as soon as possible.
We believe that your time should be spent on enjoying all the good aspects of France rather than trying to understand the heavy admin process.
If you have any questions related to your financial affairs, please contact us by filling in the form below.
The information provided is generic and not exhaustive, a detailed understanding of the profile and the investor’s potential need being a prerequisite for personalized customization.
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