3 May 2018
By Thomas Marron
06 14 24 61 29
It’s that time of year again, when we need to complete our French income tax returns, work out how much tax we owe, and submit them by the deadline.
Paper returns are due by 17th May, for both residents and non-residents. The dates for online submission depend on where you live:
Departments 01 to 19 and non-residents – 22nd May
Departments 20-49 – 29th May
Departments 50-976 – 5th June
Taxes are declared and paid a year in arrears, so your 2018 return covers income earned in 2017. The tax rates are:
Up to €9,807
€9,807 to €27,086
€27,087 to €72,617
€72,618 to €153,783
There is an additional 3% for a single person where income is between €250,000 and €500,000 per part (nothing is due from a family) and 4% for income exceeding €500,000 per part for an individual, 3% for a family (unless income exceeds €1 million per part). A quotient mechanism can reduce the effect of the high income tax if you exceptionally exceed the threshold, if certain conditions are met.
Spouses/civil partners are not taxed separately in France, instead the total income of a household is assessed. A family is divided into a number of parts familiales, including children (half part for the first two children). The total income is divided by the number of parts, income tax scale rates are applied to this lower figure and, having computed the income tax due, it is multiplied back up by the number of parts. This helps avoid the higher rates of tax, though there is a maximum benefit that a household can receive.
Income to be declared
Your income tax return covers a range of income in 2017: employment, pensions (including lump sums unless you can opt for the 7.5% fixed rate), investments (bank interest, dividends, capital gains etc), rental income etc.
This will change a little from 2018 income (payable in 2019), as investment income will instead be liable to one fixed tax rate of 30% (including social charges). This new rate will apply to investments over €150,000 per individual; households in low-income brackets will keep the option for progressive income tax rates and so avoid paying more tax than this year.
Residents need to declare all their worldwide income and gains, including income that is normally taxed outside France. UK government service pensions remain taxable in the UK and are not taxed directly in France. However, the income must be included as part of your taxable income and a credit equal to the French income tax and social charges that would have been payable is given. This applies even if no actual tax is paid in the UK.
Individuals with a taxable income of up to €18,500 (€37,000 for couples) benefit from a 20% tax reduction. There is also scaled relief available for individuals earning up to €20,500, and €41,000 for couples.
Individuals over the age of 65 (or who hold an invalidity card or receive a military pension) are entitled to a tax-free allowance of €2,376 where their total household income is up to €14,900 and €1,188 for income of between €14,900 and €24,000.
If your taxable income is below €1,569 (€2,585 for a couple) a tax credit known as the Décote will reduce your tax liability.
Pension income benefits from a 10% deduction, with a minimum of €383 and maximum of €3,752 per household.
There are deductions that can be made from your gross income before tax is calculated, such as social security contributions, pension contributions, a 10% deduction in lieu of employment related expenses (with minimum and maximum deductions) etc. Various tax credits are also available.
Payment of income tax
Payment is due the year after the income was earned. You can choose whether to pay in 10 monthly instalments from January to October, or in three instalments by 15th February, May and September. In February and May you pay the equivalent of a third of your previous year’s tax bill, then pay the balance in September based on the assessment sent by your local tax office.
Social charges are paid on top of income tax, and for 2017 income range from 9.7% to 17.2% depending on the type of income.
They are usually calculated based on the income declared in your income tax return and the authorities will send notification of the amount payable in the autumn. So you will receive your demand for 2017 social charges in autumn 2018, along with your income tax assessment.
For certain types of income/gain (assurance-vie under special rates, real estate capital gains, dividend/interest advance payment etc.), the charges are paid by the 15th of the month following the income/gain arising.
This article is just a brief summary covering the basic elements of income tax in France. It is important to seek personalised, professional advice, particularly if you are looking to lower the tax liabilities on your savings, investments and pensions. French tax may be high, but it does present opportunities for effective tax planning if you work ahead and take specialist advice.