Did you know that you may be required to complete an annual tax declaration if you are legally resident in France? Many of us expats do not, so in this blog article we will explain the ins and outs of paying taxes in France. We consider the criteria for becoming a tax resident, what types of revenue are subject to income tax, and provide you with information on how to register for the French tax system.
So when are you considered to be a legal and fiscal resident in France?
You are considered to be ‘fiscally resident’ in France as soon as you step onto French soil if you have the intention of residing here at least six months (183 days to be precise!) in the calendar year. If your spouse and children live in France and you work abroad, you may still be considered a French tax resident. According to Article 4B of the Code Général des Impôts (CGI) only one of the following three conditions need apply:
• Your main home is in France;
• You are working in France, either as an employee or for yourself;
• Your main economic interests are in France.
What types of revenue are subject to income tax?
• Wages, earnings, salaries
• Unemployment benefits
• Business or rental income
• Non-commercial or agricultural profits
• Capital gains, investment income, savings interest
• Pensions and annuities
• Income from stocks, shares and dividends
Currently you pay income tax on the PREVIOUS CALENDAR YEAR’S revenue. So this year (2016) you will be paying tax on 2015’s revenue. (1)
Why do I need to think about paying taxes in France now?
If you are not registered to pay income tax in France, and you are considered to be a resident, then you are officially breaking the law. Yikes! Fear not, we are bringing you this information now as the requests to complete your tax forms for 2015 will be sent out shortly to those who are already registered. Therefore, if you are not already registered, now is the time to get into the system. (See below for how to register for the first time.) The deadline for submitting your déclaration or tax return of income received in 2015 is 18th May 2016. (2)
Generally tax collection takes place three times during the year: the first ⅓ installment due mid-February, the second ⅓ installment due mid-May, and then the remainder (or a rebate!) due mid-September, which will represent a reconciliation based on your May filing minus the installments already made. This adjustment received around August is the famous Avis d’Impôt and may not arrive until November for first-time filers. (3)
The Fisc (French tax authority) estimates the amount of the February and May installments based on your previous year’s total income tax owed. For example, if 2016 will be the first year you file a tax return in France (on 2015’s income), and you end up owing €3000, in 2017 you will receive a tax bill to be paid in February of approximately €1000 and then another for the same amount to be paid in May 2017. You may elect to have a mensualisation where monthly estimates (1/12 of the previous year’s tax owed) are withdrawn automatically from your bank account on a certain date each month.
Note: The French tax year runs January to December.
April means getting out those calculators! (Image by Bruno /Germany from Pixabay)
What are the advantages of declaring your income tax in France?
Once you have declared and filed your first year’s income (déclaration de revenus), you will receive your tax bill (avis d’impôts) from the end of the summer onwards. This is a very useful document as it proves your residency and that you are paying taxes (and therefore abiding by the law!) You can also use it as evidence of your income when applying to enter the Social Security system and acquire the fabulous Carte Vitale! Paying into the French tax system can at times be helpful in obtaining a rental agreement or mortgage.
How can I reduce my income tax bill?
You may be able to benefit from tax credits (crédit impôts), allowances and other concessions. For example:
• La Prime d’Activité (new in 2016, replacing the RSA ‘activité’ and La Prime de l’Emploi) – You may be eligible to receive this if you are working and your income is below a certain level;
• If you implement energy conservation features in your home;
• If you invest money in an assurance vie investment policy (This is a certain type of savings investment account with tax benefits and not term life insurance that pays out on your death);
• If you contribute to certain pension plans;
• If you give to charity;
• Other tax credits are available for employing domestic help, child-carers (for children under 6), school fees for collège and lycée;
• If you declare rental income;
• Other concessions apply if you earn under a certain level, such as a reduction on your Taxe d’Habitation;
• And not forgetting the property purchase schemes that have attractive tax breaks (for example buying under the Loi Pinel).
But I already pay tax in my original home country on some or all of these. Will I be paying tax twice?
France has ‘double taxation agreements’ or ‘treaties’ with many countries to avoid residents paying tax twice on the same income.
If your tax situation is complicated, it is definitely worth finding a good accountant with knowledge of your country’s tax treaty.
Information about the tax treaty between France and the US
Information about the tax treaty between France and the UK
Check here to see if there is a treaty between France and your home country
Right, so I understand that I need to file a tax return, but how do I get into the system?
You can register to pay your first year’s income taxes in one of three ways:
• At your local tax office (Centre des Impôts)
• At your local mairie
• Or online
Helpful French phrase: “Je voudrais m’enregistrer pour payer mes impôts, s’il vous plaît.”
(I’d like to register to pay my taxes please.)
Tip: Unmarried couples should complete separate tax returns. If you are PACSed (similar to a civil union) you can choose whether to make joint or separate tax declarations.
From the second year, you will automatically receive your tax declaration form to complete online, and it will even be pre-filled for you, therefore much easier to complete.
Good luck and remember, Renestance is always here help with your French administrative questions!
Additional Notes:
- Please visit the French tax website for detailed information in English.
- It is worth noting that deadlines for online/smartphone payments and filings are usually five days after the mail-in deadlines…but first-time filers will not have access to online platforms.
- This is because France does not tax at source like many other countries. Note that discussions are currently being held to amend French tax legislation to incorporate a tax at source system, starting gradually in 2017.
- Please see French-Property.com for additional information in English.
Natasha Freidus was Renestance’s first blog editor and web content advisor. She is a consultant and trainer specialising in multimedia storytelling. You can learn more about her work at her website, Creative Narrations. Natasha moved to Roujan from Seattle in early 2013 with her husband and two children.
All articles by: Natasha Freidus
Tracey S
on 2018-03-10 at 06:31I still find the taxation of investments that are in the USA confusing. Do you know if we reside in France do we have to pay taxes to France on income from brokerage investments that are not technically retirement accounts? We are hoping to live off yields and dividends for about 5 years until I can access my Roth IRA. I need advice on how to set up this money before we come over in September so that it is not taxed in France? Thanks for any advice.
Hi Tracey, thanks for your question – it is very confusing for Americans! The general rule is that you must declare your global income when you’re a French resident, but you will not pay tax twice. Retirement income is taxed at the source, in your case in the US, so you would get a credit on your French tax return for the tax you paid in the US. If you have investment income that was not taxed in the US, then you will likely have to pay French income tax on it. I hope this is clear, but if you need more detail, please contact us. We work with bilingual tax attorneys who know the double taxation treaties very well, and we’re happy to put you in touch. Kind regards, Dennelle
Gomes
on 2018-05-16 at 00:21Hi …I would like to know that ….how to check or find out if my Boss is paying my tax properly or regular basis..I start working from December 2017 still working and receiving my salary slip every month ..but I want to confirm my self that my Boss is paying my tax properly..please let me know how to check it…Thank You
Hi Gomes, your employer only deducts social charges from your pay, not any income tax. France is moving to a Pay-As-You-Earn system, but it is not yet in place, so you have to do an income tax declaration and pay the tax directly. The HR manager should be able to explain every line on your payslip. Kind regards, Dennelle
Laura
on 2018-10-03 at 09:05Hello, I have had a house here in France for 30 years. It have only used it for holidays but now I am retired I would like to stay for longer periods approx 9 months total per year. I do NOT pay tax at home and have no income , with out getting my husband involved can I still get on to the tax system in France , I need to now get a Carte de sejour I understand , but cannot without being in the tax system ? Brexit is messing everything up for me at my retirement time, ( I did not vote for it) please can you advise me ? Laura
Hi Laura, thanks for your comment. You’re touching on a few different points, so I’ll address them one by one. 1) If you spend more than 183 days in the calendar year in France, you will be required to file an income tax declaration on your global income. This does not necessarily mean that you will owe any tax in France. 2) France taxes the ‘foyer fiscal,’ so you will have to get your husband involved. The both of you will file a joint declaration on the global income of the couple. 3) You don’t need to be in the French tax system (or be a ‘fiscal resident’) in order to request an initial Carte de Séjour – membre de l’UE. I hope this helps ease your mind. Kind regards, Dennelle
Laura
on 2018-10-03 at 09:52Thank you so much , you do not know how much you have just rested my heart .
Laura
Dan Johnston
on 2018-12-12 at 19:05Our problem is a bit different. We would like to move permanently from the USA to France (my wife is a French citizen). We aren’t concerned with annual French income taxes since we live on Social Security and our savings. Our concern is the impact of fiscal residency on les droits de succession of our estate which is large enough to be imposed at 45% in France (vs 0% in the USA). Is there a practical solution to this situation? For ex. should one spouse die and the other immediately leaves France for the USA would that relieve any responsibility toward the French authorities? Could we do a passage de maison avec usufruit to our only child who lives in the USA to avoid estate tax on a French property? Do the French authorities have any efficient means of tracking assets held in foreign real estate? Any suggestions would be greatly appreciated.
Hi Dan, thank you for commenting on the blog. You are right to examine the effects of emigrating to France on your succession plans, as French inheritance/probate laws are very different from American ones. I can’t go into all the detail here, but I’ll touch on the main points to start. For one thing, and I’m not sure you’re aware of this, as French residents you cannot decide freely how your estate is attributed. Your children cannot be disinherited and so have a part of your estate reserved for them, ie. you cannot leave everything to the surviving spouse. Another main difference is that the estate tax is calculated based on the relationship between the deceased and the heir. Surviving spouses don’t pay any estate tax. Children only pay tax on amounts over €100,000, and the percentage is calculated by tranche, ranging from 5% – 45%. See more detail here https://www.impots.gouv.fr/portail/particulier/questions/comment-dois-je-calculer-les-droits-de-succession. You can pass on ‘usufruit’ (usage) of an asset, but there will be a value attributed to it and possibly taxed. If you have assets/property and heirs in the US and FR, I highly suggest you contact a lawyer who’s experienced in cross-border inheritance laws and the US-FR treaties. Email me for the name of one we strongly recommend. Kind regards, Dennelle
Paul
on 2019-02-28 at 01:30Thanks for this forum. I am a us citizen who lives in France. I have received a large inheritance in the USA. The financial institute in the USA says that because I live in France, they are only permitted to transfer the funds to a French account. Is this correct? My employer is in the states and I will move back to the States. I would like to keep this fund in the States. Is this possible? And how can I explain this to the financial institute.