Understanding French Income Tax: What You Need to Know

 

Essential Reading

Understanding French Income Tax: What You Need to Know

You’ve probably heard rumours about the French tax system being one of the most complicated—and expensive—in Europe. It’s true that overall rates of taxation tend to be on the higher side, but when it comes to income tax, you might be surprised by how low rates can be, especially for families of average means. Here’s what you need to know about French income tax.

Do I Need to Pay French Income Tax?

The first and most important question is whether or not you are liable to pay income taxes in France. If you are legally resident in France, you must declare your global income on your annual French tax return, and you will be liable for French income tax on your earnings.

However, there are certain situations in which non-residents may also be liable for French income tax or occasions where French residents may pay their income tax in a foreign country depending upon the double-tax treaty between said countries.

See our guide to Understanding French Tax – Are You Tax Resident in France?

French Income Tax: What Do You Need to know?

For French residents, French income tax is levied on your global income, including earnings from employment, business ventures, or self-employment, as well as income from investments, savings interest, pensions, and property rentals. Before we look at French tax rates and allowances, there are a few things that you need to understand about how French income taxes are calculated.

Fiscal Household

In France, income tax is calculated based on your ‘fiscal household’ or foyer fiscal, not for each individual taxpayer as in many countries. This means that if you are married or in a PACS civil partnership, you will file a joint tax return. Taxes are calculated based on the total income of your ‘fiscal household’ (i.e. you and your partner’s income combined) and your ‘quotient familial’ (i.e. the total number of family members that make up your household).

Put very simply, a family with dependent children will pay less tax than an individual or married couple with no children. If you are single, separated or divorced, your fiscal household will be made up of yourself and any dependent children who live with you.

Find out more about this in our guide to Understanding French Tax – What is a Fiscal Household in France?

Income Tax and Social Charges

France is often called out for having high taxes, but it’s important to understand that the bulk of taxes levied on income comes from social charges (prélèvements sociaux or contributions sociales) rather than income tax. Income tax rates, starting at 11% after a tax-free allowance, can actually be much lower than those of other countries, especially when you factor in the ‘quotient familial’ as explained above. However, the addition of social charges can make this initial figure misleading.

While this article looks solely at income tax, it is imperative to take into account both of these taxes to fully understand your income tax liabilities in France. For more on this, read our guide What You Need to Know About French Social Charges.

PAYE System

Since 2019, a Pay-As-You-Earn (PAYE) or ‘prélèvement à la source’ system has been implemented throughout France. This system now applies to all employment income, retirement income (state pensions and annuities), sick pay and maternity leave, and income on rental properties. A standard French payslip will detail the amount of both impôt sur le revenue (income tax) and charges sociales (social charges).

Read our article Understanding France’s Pay-As-You-Earn (PAYE) System

Annual Tax Declarations

In France, every resident over the age of 18 must file an annual tax return. This is a legal requirement, and it is your responsibility to declare all of your global earnings. Tax returns can be submitted from April each year, and the final deadlines are due in late May or early June, depending on which French département you live in. This means you have around two months to file your return – much less than some countries, such as the UK, which allows almost six months

In France, the tax year runs from January 1st to December 31st, and you will declare your previous year’s earnings in April-June of the following year. So, in 2022, for example, you will declare your global income from 2021.

Make sure don’t miss anything by following our France Tax Calendar 2022- All the Key Dates for Your Diary

French Income Tax: How Much Will You Pay?

Now that we’ve established the basics of the French income tax system, let’s take a look at the applicable French tax rates and tax-free allowance. France’s barème de l’impôt (tax scale) for the year is announced at the end of the year, and the tranches du barème (tax bands) will be calculated in accordance with annual inflation rates.

So, for example, the 2022 income tax rates were announced at the end of 2021 and will be applied to your 2022 tax return (tax on your 2021 income).

French Income Tax Rates 2022

The amount of income tax levied on your 2021 income (declared on your 2022 tax return) ranges from 0% to 45%, and is calculated based on the following tax bands.

  • Up to €10,225: 0% tax rate (this is your tax-free allowance)
  • From €10,226 to €26,070: 11% tax rate
  • From €26,071 to €74,545: 30% tax rate
  • From €74,546 to €160,336: 41% tax rate
  • More than €160,336: 45% tax rate

The following example is taken from the French government website here.

For a single person (1 part) whose taxable net annual income is €30,000, the calculation of his tax is as follows:

– Up to €10,225 (band 1): €0

– From €10,226 to €26,070 (band 2): €1,742.95

– From €25,711 to €30,000 (band 3): €1,179

Total amount of tax: €2,921.95, or 9.74% of their taxable net income.

Income Taxes for Businesses and Self-Employed Workers

It’s important to note that different tax rules may apply to businesses and self-employed workers, for example, those under the auto-entrepreneur scheme. It’s highly recommended to seek the advice of a registered accountant or international tax advisor if starting a business or setting up as a freelancer in France in order to fully understand your tax responsibilities and liabilities.

See our business zone for more on starting a business in France or learn more about taxes and social charges for auto-entrepreneurs.

Filing Your Tax Return in France

As previously mentioned, all French residents must fill in an annual tax declaration. Your annual declaration can be made online via the French tax website, and you can save and amend your declaration before deciding to submit it. Tax claims and requests for tax refunds or rebates can also be made online.

The process is slightly different when you fill out your first tax return (which must be completed as a paper document), and there are certain additions you may need to include if you have foreign savings, investments or income to declare.

See our guide to Filling in Your First French Tax Return: A Simple Guide

The French Tax Authorities have some English-language information available here, and they also publish an annual pdf guide (in French) and a tax simulator which you can find here.

Paying Your Taxes in France

Whether you are moving to France, own French property, or have business interests, assets, or investments in France—FrenchEntrée is here to help with all your tax questions. Our Essential Reading articles will talk you through all the basics, from income tax and social charges to wealth tax and property taxes. However, international tax liabilities can be complicated, so if in doubt, we always advise discussing your personal situation with one of our recommended financial or tax advisors.

Disclaimer: This guide is provided for general information purposes only and is not intended to be a substitute for professional advice regarding any aspect of your tax planning or tax liabilities in France. FrenchEntrée cannot be held responsible for the consequences of decisions or actions you may choose to take in connection with French tax declarations or tax liabilities.

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