Income tax in France works differently to many different countries and although all the different numbers and paper work may seem daunting, Lodgis is here to help! Read our guide on paying income tax in France to understand the system and work out what you need to be doing come May!
Who has to pay income tax?
– Permanent residents : If your primary residency is in France (regardless of how much time you spend in the country), you are considered a French tax resident. This is also true if you have significant assets in France.
– Temporary residents : You qualify as a resident if you work in France and if you spend more than 183 days a year in France (these do not have to be consecutive).
– Owners of a second home that is rented out : If you are a landlord, of an apartment in Paris for example, you have to declare any revenue generated even if your primary residence is not in France. For non-residents the income tax rate is 20 %. If you sell property in France, the tax rate is 19 % pour EU citizens and 33 % for other nationalities.
How does income tax work?
Unlike many other countries like the UK and the US, income tax in France IS NOT DEDUCED FROM YOUR MONTHLY SALARY and has to be paid at the end of the year.
Income tax rates in France depend on your annual net income and are split into brackets:
– Revenue less than 9,710€ net : 0%
– Revenue between 9,710€ and 26,818€ net : 14%
– Revenue between 26,818€ and 71,898€ net : 30%
– Revenue between 71,898€ and 152,260€ net : 41%
– Revenue of more than 152,260€ : 45%
If you look at the bottom of your payslip, you’ll see the running total (cumul) of your taxable income to declare at the end of the fiscal year.
For example, if the net taxable income at the bottom of your payslip is 50,450€ here is how much income tax you’ll pay :
(26,818- 9,710) x 14% + (50 450 – 26 818) x 30% = 9,484,72 €
You pay income taxes in France on your total income and you need to declare your international earnings. For example, if you’re living in France and do freelance work in Australia, you’ll have to declare it.
Your tax rate can change according to your marital status and how many children you have.
You declare your taxable earnings as a household, so have to calculate how many “parts” are in your household and then divide your total income accordingly. If you are married or pacsed, you and your partner count as 2 parts, the first two children count as 0.5 parts and if you have three or more children, they count as a part.
For example: if your annual net taxable income is 80 000€, but your wife doesn’t work and you have two children, you’ll be in the same tax bracket as if you were earning 26 666€ (=80 000€ / (2 parts+ 2 half parts)), with a tax rate of 14%.
If you’re unmarried and earn 80,000€ net taxable income, you’ll have to pay a tax rate of 41%. This means that you pay a lot less tax if you’re married or pacsed with children than if you were single.
When are my taxes due?
This depends on whether you file your déclaration des revenus (tax return) online or by mail. Any tax returns by mail need to be submitted by the 17th May. If you’re doing it online, the time limit is determined by where you live. For departments 1-19 the cut-off is 23rd May, for departments 20-49 the cut-off is the 30th May, for departments 50 and upwards it is the 6th June. The limit for non-residents is the 23rd May.
Note: If your taxes are late you’ll have to pay a 10% penalty (majoration)!
Double tax relief and tax treaties
Over 120 countries have a double tax treaty with France, including the UK and the US. This is to avoid residents of the US and French residents paying taxes twice. If your home country does not have a double tax treaty with France, you can deduct any foreign taxes from your tax return as an expense.
You have to file a tax return with the IRS every year if you’re an American citizen even if you live overseas.
According to your situation, you may also have to file an informational return on any assets held in a French bank with a Foreign Bank Account Report (FBAR). However, the US tax system has certain measures in place to help out its overseas citizens, such as:
- Foreign Tax Credit (which allows you to offset your taxes paid in France with your taxes paid in the US),
- Foreign Earned Income Exclusion (which lets you exclude around $100,000 of foreign earned income from your US tax return)
- Foreign Housing Exclusion (which lets you offset various household expenses brought about by living overseas).
How do I pay taxes online?
This is probably the easiest way to file your taxes and anyone can do it! Luckily your online tax return is already partially filled-in by the tax authorities with some of your personal details like marital status, your salary and your social security contributions. Follow our step-by-step guide…
1) Go to the impots.gouv website or use their handy app, impots.gouv (available for apple and android).
2) Use your tax number to log on to your account. If this is your first time paying your taxes online, you may have to use this number to create an account.
3) Read the information that has already been filled in and see if it’s accurate. Correct your details if they aren’t accurate. Don’t forget to fill in anything left blank, particularly any tax-deductible expenses, any extra income or tax credits that are applicable to your personal circumstances.
4) Send it off! You should receive a confirmation email once this is finished. Don’t worry though, you can still make corrections to your tax return up until the cut-off date.
How do I pay my taxes by mail ?
If you’ve paid your taxes before you should receive a tax return in the mail that’s already partially filled-in with your personal details. If it’s your first time filing a tax return or just haven’t received your form in the mail, you just need to download form 2042 from the impots.gouv website or collect one from your local tax office (you can find the nearest one here). Follow our step-by-step guide to filling in your tax return:
1) If it’s partially filled in, check that this information is accurate and make corrections if not. Make sure all the necessary boxes are filled in!
2) Don’t forget to add any other sources of income (remember we’re talking about your total, international income), any tax deductible expenses or any tax credits (from things like alimony or charitable donations). Make sure you remember that some other sources of income need their own special tax forms (like property income, capital gains, overseas income, unearned income).
3) Send it off! The address for the tax authorities is on the first page of the form (centre des finances publiques), as well as the cut-off date. Simple!
NOTE: You do not pay anything when you send off your tax return! The tax authorities will send you a bill (avis d’imposition) once they have received your tax return, normally around August or even November if this is the first time that you’re paying taxes in France. The payment cycle in normally in three different installments, but you can also pay monthly if you contact your local tax office.