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The rules for establishing whether you are resident in France are quite complex and contain some grey areas. Generally you will be considered habitually resident once you have stayed France for more than 183 days during a calendar year. However if you have moved around a lot during the year, and ended up spending more time in France than anywhere else, you may be considered resident if even though you have spent less than 183 days in the country. If you have a home and/or family in France you will generally be considered resident, even if you are working abroad. If you have the larger part of your business in France you will generally be considered resident. If it comes down to a dispute with the court or tax authorities, then such things as whether you can show that you are taxed as a resident of another (non-tax haven) country will generally swing the balance. Dual residency is only possible for individuals coming from country without a tax treaty with France.
It is important to be aware of the terms of any tax treaty that exists between France and your home country as this may well dictate how you are treated with regards to residency and tax. For more details see: Taxation – Tax Treaty Considerations for Expats in France.
As a resident you will be taxable on your worldwide income and gains. If you remain non-resident you will only be taxed French source income.
Tax rates and allowances
The tax year runs from 1 January to 31 December.
If you are a resident there is no deduction of income tax made by your employer from your wages or salary. However they will deduct social security contributions. Instead you must pay instalments of tax due in one of two ways:
In both cases you can apply to have the instalments reduced if your income drops significantly.
Income tax rates in France follow the tax band method used in many countries, where all income in a band is taxed at the same rate. However to calculate actual taxable income an adjustment is made using a quotient familial, decided by the taxpayer’s family status. This system is only used in France. The taxable income is divided into parts, the number of parts depends on the number of members of the household, and what sort of household it is, as shown in the following table:
The progressive tax table below is then applied to one of the resulting parts, and the result is then multiplied by the total number of parts. The effect of this is that a single/widowed person earning €10,000 will pay 5.5% tax on €3,988 of their income (€10,000-€6,012), whereas a married couple will not pay any tax at all; as once the income is divided by two it is below the threshold for tax. At €15,000 the single person will be paying some tax at 14% (and the whole band at 5.5%) whereas the married couple will only be paying tax at 5.5%. Once dependants are included in the calculation, tax reduction per additional 0.5 on the quotient is limited to €2,000. Special rules apply for certain case such as disabled dependants. One obvious effect of this curious method is that the higher rates of tax effect single people far quicker than others as income rises.
The following table shows the progressive tax rates in France for residents:
|Up to 6,011||0%|
|From 6,012 to 11,991||5.5%|
|From 11,992 to 26,631||14%|
|From 26,632 to 71,397||30%|
|From 71,398 to 151,200||41%|
|151,201 or more||45%|
You will also have to pay four types of social contributions amounting to approx 15%, though a portion of this is usually deductible against tax.
Non-residents are also subject to the progressive tax rates in the table above on French-sourced income. However the tax payable cannot be less than 20% of the French-sourced income. You may have withholding tax of up to 20% deducted by your employer.
Tax returns must be sent in by the date specified on the form; generally this is in late May or early June. There are penalties for late or incorrect returns.
Sections in TAXATION IN FRANCE:
» Overview of Tax Issues for Expats in France
» Employment Taxation for Expats in France
» Business Taxation for Expats in France
» Investment Taxation for Expats in France
» Tax Treaty Considerations for Expats in France
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