It’s tax return time in France. If you moved to France in 2009 and have yet to complete your first tax return, now is the time to get organised for your first declaration.
This BLOG is not designed to be a step by step guide, but more of an introduction and overview of the main points to ensure that you have taken all considerations into account.
If this is your first tax declaration, unless your situation is very simple indeed, I would recommend seeking professional guidance.
If you are unsure of your residency status i.e. whether you should be completing a tax declaration in France or not, then follow this link to the BLOG on “Are you tax resident of France?”
For those already in the French system, you should have received your declaration forms by now; for those not yet in the system, returns will be available at your local tax office and online soon (see www.impots.gouv.fr).
Those who wish to complete their returns online, may do so right now.
If you have received your tax returns in the post, you may notice, there is only one copy this year (they are trying to save paper). The issue is, for some, that they are sending the simplified versions, which do not contain the boxes they need, so they find themselves needing to obtain another form (not really saving paper then!)
A point for those doing their first return, you may need to complete the “France Individual” (formerly called the FD5) if you have income taxed at source in the UK.
This is a UK form in English and French, which you give to your local French tax office (for this reason, always put the French copy on top) at the time of completing your first tax return. This is sent by your tax office, indirectly, to the UK and ensures you are repaid for any tax taken whilst a French resident and that future income is paid gross, where applicable. If you have completed a P85, do ensure that the dates you use on the France Individual match those on the P85.
The main French income tax Forms
The 2042 – the main income tax declaration
The 2042c – The complementary form for extra information
The 2047 – the declaration for income from abroad
The 2044 – the declaration for income from property
The deadline for paper returns is 29th May
For online returns, it depends on which area you are in, but it is from 11th to 25th June. I would always advise not leaving it until after 29th May in case, for some reason, you are obliged to complete a paper return; however, this is very useful for those who are completing late.
A real sticking point this year seems to be what exchange rate to use. The main reason for this is that local tax offices like to keep things simple for themselves (which is very understandable given their workload) and sometimes offer a fixed rate for the year. This is commonly the Paris exchange rate as of 31st December. That rate for 2008 was 1.049868766 (to be precise!)
For income tax, this rate is for use by businesses (CGI 38, 4) but not for individuals (apart from wealth tax, for which this rate is suitable); however, some tax offices prefer its use, since it simplifies checking returns. This is also somewhat advantageous this year, for us the tax payers, due to the fact that Sterling against the Euro was near its all time low at this date.
However, the advantage for the taxpayer is clearly a disadvantage for the French treasury who are already dealing with highly stretched budgets due to the current climate, thus those using the end of year rate may find themselves having to redo their returns to satisfy the treasury that they are not losing out.
We have heard of some people using an average rate and that being accepted by some tax offices. However, being that a finite annual average figure is not actually published by the French tax authorities (though the Banque de France does offer a rate) we tend not to recommend its use.
The law is clear on the exchange rate for private individuals and is highlighted in the guidance notes for completing the 2047 and that rule is that you must use the exchange rate of the day the money was received, using the Paris rate. The best method of checking this rate is to look at the Banque de France website.
Bank Accounts outside France
As a foreigner, it is likely that you have bank accounts outside of France. It is very important that you offer details of these accounts with your return. This is asked for in box UU of the 2042. This can be achieved by filling in a 3916 for each account, or you can simply detail all your accounts on a separate sheet of paper.
If you fail to do this you may be fined €750 PER ACCOUNT not reported, so if you have several accounts this may become an expensive omission.