Tax

French tax summary 2016.
The information on this page is for guidance purposes only and should not be used as a substitute for proper professional advice.

.01

Determination of residence

The taxpayer is deemed to be tax resident in France if any one of the following tests is satisfied:


  • They spend 183 days or more each year in France;
  • Their principal business activity in France;
  • Their habitual residence is in France;
  • Their "centre of economic interests" is in France. This would be the case if the taxpayer has their principal investments in France, manages their business from France or the majority of their income is from French sources.

If the taxpayer is also resident in another country, their residence is decided in reference to the relevant Double Tax Treaty, if one exists between the two countries.


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.02

Consequences of being tax resident in France

As a French tax resident, the taxpayer is liable to:


  • French income tax on their worldwide income and capital gains. Where the taxpayer is also taxed in another country on this income, double tax relief is taken;
  • French Wealth Tax on their worldwide net assets;
  • French Inheritance Tax on assets that they bequeath on death or gift during their lifetime. Where the taxpayer is also domiciled in another country for the purposes of this tax, double tax relief is taken.


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.03

Personal income tax rates in France
Impôt sur le Revenu des Personnes Physique. Tax Year 2015 (income to be declared in 2016).

Taxable income (Euros) Tax Rate %
Up to 9,700 0
9,700 to 26,791 14.0
26,791 to 71,826 30.0
71,826 to 152,108 41.0
152,108 + 45.0

Income tax is calculated according to the total income of the household, which is deemed as being equally distributed between each member of the household (called a part). The total income is divided by the number of parts before applying the above rates. The resulting figure is then multiplied by the number of parts to give the total tax due.

Each child counts as half a part. The tax advantage obtained for each child is limited to 1,510 Euros (known as plafonnement), or 3,562 Euros for one-parent families.


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.04

Income tax deductions and allowances

Allowances against employment income


  • General deduction of 10% of salary. The deduction is capped at 12,170 Euros;
  • Contributions into pension schemes, subject to an upper limit.


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.05

Filing deadlines for French income tax returns

The French tax year is equal to the calendar year. Filing dates for the annual income tax return, for both residents and non-residents, can be found in our 2016 tax information sheet.

Payments on account are due by the following dates:

  • First payment: 15th February;
  • Second payment: 15th May;
  • Balance: Payable on issue of final tax assessment, in September.ç


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.06

French company tax rates IS Impôt sur les sociétés.
2016 rates: tax on 2015 profits.

Currently there is a flat tax rate of 33.33% on profits on large companies. In addition, there are Social Contributions of 3.33%.

For qualifying small-medium companies (turnover less than 7.63 million), there is a reduced tax of 15% on the first 38,120 Euros of profit. In order to qualify, the share capital of the company should be fully paid up and at least 75% of this share capital should belong to physical persons.

There is also a supplementary tax contribution (surtaxe) that applies to companies with turnover above 250 million Euros.

French company tax is payable on account with payments due on a quarterly basis:


  • First payment: 15th February;
  • Second payment: 15th May;
  • Balance: Payable on issue of final tax assessment, in September.


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.07

VAT (TVA- Taxe sur la Valeur Ajoutée)

The current standard rate of VAT in France is 20%. This is the general rate applying to the supply of goods and services.

There is a reduced rate of 5.5% or 10% which applies to certain goods and services, including:

  • Food products;
  • Passenger transport;
  • Hotels, pensions, gîtes ruraux;
  • Cultural activities e.g books, cinema, theatre;
  • Certain works carried out in the main residence;

Finally, there is a special rate of 2.1%, which applies to a limited scope of goods and services.


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.08

Capital Gains Tax on the sale of French property (plus-values immobilières)

The sale of a resident's main residence is exempt from Capital Gains Tax.

In other cases, the deductible cost is calculated as follows:


  • Purchase cost plus;
  • Agency, notary costs etc. on purchase. If these are not calculated, a fixed percentage of 7.5% of the purchase cost is allowed;
  • Improvement / renovation costs, in the case where invoices can be produced. If not, 15% of the purchase cost is allowed if the sale takes place at least five years after acquisition.


The taxable gain (plus-value brute) is reduced according to the period that the property has been owned, and reaches zero after 22 years of ownership. This is for income tax purposes; Social Charges are reduced to zero after 30 years of ownership.

There are also surcharges for capital gains over 50,000 Euros on the sale of property, as follows:


Capital gain € Additional tax €
50.000 - 60.000 2% less marginal deduction
60.000 - 100.000 2%
100.000 - 110.000 3% less marginal deduction
110.000 - 150.000 3%
150.000 - 160.000 4% less marginal deduction
160.000 - 200.000 4%
200.000 - 210.000 5% less marginal deduction
210.000 - 250.000 5%
250.000 - 260.000 6% less marginal deduction
260.000€ + 6%

For residents of France, there is currently 19% tax on the resulting gain; and Social Charges which are currently 15.5%.

For non-residents, the following percentage of the taxable gain is withheld at source on sale of the property.


Residents of the European Economic Area 19%
Others 33.33%
.09

Taxe d'Habitation and Taxe Foncière

These are French local property taxes.

The Taxe d'Habitation is payable by the occupier of the property, and the Taxe Foncière is payable by the owner. Both taxes are payable on an annual basis.

Owner / occupiers of property pay both of these taxes.



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.10

Wealth Tax in France
ISF (Impôt de solidarité sur la fortune). Taxation of taxpayer's net wealth as at 1st January 2016.

Net wealth of taxpayer (million Euros) Tax rate %
0.8 - 1.30 0.50
1.30 - 2.57 0.70
2.57 - 5.00 1.00
5.00 - 10.00 1.25
10.00 + 1.50

The taxpayer is exempt from submitting a Wealth Tax declaration if their assets are below 1.3 million Euros.

Basis of taxation:

  • Non-residents are taxable on their French fixed assets (i.e. property) only;
  • French residents are taxable on their worldwide net wealth.

The filing deadlines are the same as for the income tax returns.


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.11

Income tax on capital income - interest, dividends and capital gains on investments.

Up to 2012, the taxpayer could opt for French savings income to be subject to taxation at source, with no further income tax payable in their annual tax return. This is known as a prélèvement forfaitaire libératoire (PFL). This option was abolished as of 1st January 2013, with the exception of taxpayers with income of less that 2,000 Euros per annum.

There will, however, still be tax withheld at source on this income.

Capital income is to be declared in the annual tax return and taxable according to the normal income tax scale, with a deduction for any tax withheld at source.

Dividends are subject to a general deduction of 40% to compensate for the company tax already paid on the profits being distributed. The fixed allowance from previous years has also been abolished.

Capital income is also subject to Social Contributions (Contributions Sociales) of 15.5%.



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