Income Tax in France
If you are domiciled in France you are liable to pay income tax. The French tax laws are complex and there will be winners and losers in comparison with the UK system.
Long term residents frequently choose to take French citizenship because foreigners are subject to an increasingly heavy burden of personal taxation.
There is an outline of the system below. Detailed information is available from a French government interdepartmental economic agency - Delegation a l'Amenagement du Territoire et a 1'Action Regionale (DATAR). Their UK address is:
21-24 Grosvenor Place
London
SWlX 7HU
Tel: 020 7823 1895
Essentially DATAR's UK office is intended to offer fiscal advice for anyone considering selling to the French market, or setting up a business in France itself. Their publications include helpful advice on personal taxation. Their address in France is:
1 Avenue Charles Floquet
75007 Paris
Tel: 01 47 83 61 20 or 01 40 65 12 34
French income tax is assessed on a family basis. The husband is responsible for the return which includes the income of his wife and children who are still in the educational system, or doing their military service. Divorced, separated or widowed persons claim allowances according to circumstances. Across the board allowances include:
- Money spent on major property repairs.
- Money spent on certain 'green projects' such as the installation of solar energy panels for heating.
- Payments for maintenance and dependent relatives other than children.
- Gifts to certain charities.
- Contributions to the Securite Sociale.
- Approved life assurance premiums.
- Interest payments on certain loans.
- Speci al arrangements for single parents with young children.
Taxable income is worked out by deducting allowances from total income and dividing the net figure by:
- One for a single person with no children.
- Two for a married couple with no children.
- 2.5 for a married couple with one child.
- An extra 0.5 for each additional child. A married couple with four children will divide by four.
When a taxable income has been worked out the rates that apply fall into a banded structure. The following are approximate figures for those incurring an incoming tax liability in France in 2002. They are based on indexing the tax authorities 2001 figures. The following bands should therefore be treated only as a rough guide:
The first €5,666 of taxable income is tax free
€5,666 to €6,166 - 5%
€6,166 to €7,000 - 10%
€7,001 to €10,833 - 15 %
€10,834 to €14,000 - 20%
€14,001 to €18,333 - 25%
€18,334 to €21,333 - 30%
€21,334 to €25,334 - 35%
€25,334 to €41,000 - 40%
€41,001 to €58,000 - 45 %
€58,001 to €67,166 - 50%
€67,167 to €77,333 - 55 %
€77,334 and upwards - 58%
A married couple with no children, no allowances and a joint income of €41,666 would pay tax as follows:
Half of €41,666 is €20,833, so each has a taxable income of €20,833
On the first €5,666 no tax is paid
On the next €500 at 5 per cent €25
On the next €833 at 10 per cent €83
On the next €3,833 at 15 per cent €575
On the next €3,166 at 20 per cent €633
On the next €4,333 at 25 per cent €1,083
On the final €2,500 at 30 per cent €833
Total €3,233
Thus their joint tax bill would be (€3,233 X 2) €6,466
The same couple living in England would automatically have personal allowances of €7,384 each. Their tax bill would look like this:
Individual taxable income €20,833 - €7,384 = €13,499
Tax on first €3.072 @ 10% = €307
Tax on next €10,427 @ 22% = €2,294
Total = €2,601
Thus their joint tax bill would therefore be double €2,601 or €5.202.
The French tax system benefits large families and those on relatively low incomes. The tax year runs from 1 January each year and bills are paid in three equal installments in the year following the liability.
Filling in a tax return is difficult because of the complexity of the system and the amount of technical language involved. English-speaking residents paying income tax in France invariably require the services of an accountant.
When the authorities suspect that tax declarations are inaccurate or fraudulent they will investigate. In certain circumstances residents with complex tax affairs (including perhaps income from a number of sources outside France) will be assessed according to the punitive regime de d'imposition forfaiture.
Using this system income is assessed according to arbitrary norms. This includes ascribing a letting value to all properties you own and multiplying it by a factor of three or five. Cars are valued and taxed at 75% of maximum new showroom value, servants are assumed to have massive salaries, and race horses are reckoned to be winners.
The system is rarely applied but it demonstrates what can happen to those who fall foul of the tax authorities.
