Income Tax

French income tax applies to your worldwide income if you are resident here. If you are not French resident, income tax is levied only on income earned in France. It is important to remember that residence is not a question of choice but fact. If the French tax authorities deem you resident they will be able to assess you up to 3 years in arrears, often leading to tax penalties and interest charges. If, however, you find yourself 'exposed' in this way, and realise that you should have been paying French tax, a voluntary filing of outstanding French tax returns is usually treated more leniently.

The most common sources of income received by expatriate French residents are France or UK based rental income; investment income or employment. In accordance with the terms of the double tax treaty signed by France, only UK rental income will be taxed in the UK. All other worldwide income is taxable in France, and will therefore require the filing of a French tax return.

A UK resident who owns a second home in France and does not receive any French source income will not need to file a non-resident income tax return.

For those of us who are tax resident in France, here is the schedule of tax rates applicable to income received in 2016:

Income Rate of Tax
  %
Up to   9,710 0.0%
9,711 to 26,818 14.0%
26,819 to 71,898 30.0%
71,899 to 152,260 41.0%
152,261 and above   45.0%

The above will apply in 2017 in respect of the taxation of 2016 income and gains from financial assets.

 






 



Income tax, and indeed most tax in France, is an elective process. You have to declare your own liability. In the case of income tax, you have to go to the 'bureau des impots' and ask for your first tax return. This will register you in the system, and you will then automatically be sent a return in following years.

The French system taxes on a household basis. Each household has a set number of family shares, or 'parts', depending on the marital status, number of dependants etc. A married couple is entitled to 2 parts, an extra half part is granted for the first two children, and a full part per child thereafter.

Before applying the above scale rates the total household's taxable income is divided by the number of family parts. The tax liability obtained after application of the scale rate is then multiplied by the number of parts to obtain the final liability of the household. In this way the more parts you have in your household, the more bites at the nil and lower tax rate bands you get.

If the concept is easy, the execution isn't. French tax return forms can be more than a little daunting if you have anything more than the most simple of tax circumstances. It can be a good idea to enlist the help of an accountant or financial adviser for at least your first return.