Income Tax in France

Most couples pay less income tax in France or “impôts sur le revenu” than they would as residents of the UK. This is not an outrageous claim but a statement of fact. There is no “tax allowance” in the British sense; there is an amount of money that you may earn, which is assessed at 0.00%, so this is arguably a question of semantics.  The French approach is a distinct tax regime, with its own rules and structure that differ significantly from the UK system.

A substantial difference is the “Quotient Familial” (pronounced qwo-shon famil-ee-yal), better known as the “parts” system. In the UK, we are taxed as separate individuals. This means that if in a couple, one person earns £100,000, they receive just the one allowance on this income, resulting in the earner becoming a high-rate taxpayer. In the UK, this is where we commonly see self-employed people, for tax purposes, employing their spouse in order to make use of the nil-rate allowance and the lower tax bands.

However, this would be unnecessary in France because couples are taxed together. A couple where one person earns €100,000 would be “deemed” as though each person earned €50,000. This can result in considerable savings over the UK position. Moreover, if you have dependent children, you can divide this income into even more “parts”, further reducing your tax liability. The total income of the household is divided by the number of parts to determine the tax calculation. This system can significantly reduce the overall tax burden for many households.

Just to be clear, a “couple” in France is defined as two people who are either married or in a “Pacte Civil de Solidarité”, or PACSed.

Understanding the family quotient system is key to optimising your tax position in France.

Determining Tax Residence in France

Establishing your tax residence in France is a fundamental step in understanding your tax obligations and managing your overall tax position. Under the French tax system, you are generally considered a tax resident if you spend more than 183 days in France within a calendar year, have your main home (domicile) in France, or if your principal professional activity or the centre of your economic interests is located in France. Meeting any of these criteria means you are subject to French income tax on your worldwide income, which includes employment income, investment income, rental income, capital gains, and pension income.

For tax residents, the French tax administration requires the declaration of total income, both from French sources and foreign sources, on an annual tax return. This comprehensive approach ensures that all the income you receive, whether from employment, financial investments, or real estate assets, is considered when calculating your net taxable income. The French tax system applies progressive income tax rates to tax residents, and various tax credits and tax reliefs, such as those for dependent children or certain types of pension income, can help reduce your overall tax burden.

Non-residents, on the other hand, are only taxed on income from French sources, such as rental income from French property or certain types of investment income. Typically, non-residents are subject to a flat tax rate on this income, and may also be liable for property taxes and, in some cases, wealth tax on real estate assets located in France.

International tax treaties, including the tax treaty between France and the UK, play a crucial role in preventing double taxation and clarifying tax residency status. These treaties can affect how your income is taxed and may provide relief or credits to offset taxes paid in another country. It is essential to review your tax position in light of these agreements, especially if you have cross-border income or assets.

In addition to income tax, tax residents and property owners in France may be subject to local property taxes, wealth tax, and social taxes. Employer social security contributions and social security charges also apply to employment income, further impacting your overall tax liability. Other considerations, such as gift taxes, unemployment insurance, and unemployment benefits, can also influence your tax obligations depending on your personal circumstances.

Given the complexity of French tax rules and the potential for significant tax liabilities, it is highly advisable to seek guidance from tax professionals familiar with both French and international tax systems. By understanding your tax residence status and the associated tax obligations, you can take advantage of available tax credits, minimise your tax liability, and ensure full compliance with French tax administration requirements. This proactive approach is especially important for high-net-worth individuals and those with international ties, helping to safeguard your financial interests and optimise your tax position in France.

If you’d like to check the latest French income tax bands, you’ll find the most up-to-date information on our main Tax Rates page. This helps ensure you’re working with accurate figures as rates change from year to year.

How is French income tax collected?

French income tax is always applied in arrears, and thus if you move to France in January of any year, your first income tax return is to be completed in May the following year. Anyone deemed to be a fiscal resident of France must complete a tax return or “déclaration d’’impôts”. It does not matter if you have no income, or if all your income is deemed “exempt”, or where in the world the income is paid; if you live in France, you must complete and file a return as part of your tax obligations.

Another point is that it is unlikely that you will be sent a tax return in the first instance. French law obliges you to either go to the tax office to obtain one or declare it via the website. The argument that you did not receive a return does not protect you from being fined or, even (in very extreme cases), receiving a custodial sentence. Filing annual tax returns, specifically a French tax return, is a legal requirement for residents. Tax payments are made based on the information provided in your return. The process of filing determines the income tax owed or any refund due, and the final tax payable is calculated after deductions and credits. If you file late, your tax bill may include penalties in addition to the amount due.

Get in Touch with Kentingtons for Expert French Tax Advice

There is so much more to know about the French income tax system than can be outlined here. For this reason, navigating the complexities of income tax in France and optimising your tax position requires expert guidance. Whether you are relocating to France or are already a resident, Kentingtons offers tailored financial and tax advice to help you manage your income tax, inheritance tax, capital gains tax, and more.

Don’t leave your financial future to chance. Contact Kentingtons today for a personalised consultation and take the first step towards effective tax planning in France.

The information on this page is intended only as an introduction only and is not designed to offer solutions or advice. Kentingtons can accept no responsibility whatsoever for losses incurred by acting on the information on this page.