French taxation system – what you need to know
Taxes are often referred to as one of the few certainties in life, and there are very few places in the world where British expats can pay no tax. France is a popular destination due to its proximity to the UK, change in lifestyle and better weather. In this guide, we take a look at what the French taxation system means for those relocating from the UK.
Expats are liable to pay tax in France upon becoming a resident, which at a basic level means spending more than 183 days in the country or if France is considered the main residence. This is likely to be the case for the majority of expats relocating long term, and worldwide income is taxed as a French resident. However, there is a Double Taxation treaty between the UK and France to ensure that tax can only be charged once (not once in each country). Income tax ranges from 14% (once earnings exceed €9,710, the income tax threshold) to 45% for high earners. For those who are considered non-residents, tax is usually charged on French source income at a minimum of 20%.
If you are moving to France from London, Cadogan Tate are here to provide help and advice for you every step of the way.
Main differences between French and UK taxation
In the UK, each person pays income tax on their individual earnings, but in France, income tax is worked out based on the entire household income from all sources (including salaries, investments, dividends, pensions and properties, and so on). The tax owed is also dependant on the number of people living in the household. The total household income is divided by the number of people, with each person worth one ‘part’ (parts familiales), except for the first two children who are counted as half a ‘part’ each. This calculation results in an income tax band. There are some circumstances where things may be worked out differently, for example if the two parents are not married or in a civil partnership. The system may sound complicated, but it can benefit those moving with families, as generally married couples with children pay less tax than individuals.
Once the tax band has been worked out using this calculation, the tax owed can then be determined. Everybody needs to submit a tax return and pay a tax bill each year, rather than having monthly deductions from a salary, unlike in the UK. This means that it’s important to save the money for this bill in order to be able to pay it when it’s due. Married couples can opt to submit individual or joint tax returns.
The tax year runs the same as the calendar year, with tax returns due to be submitted online by the end of June (or May if done offline). There are penalties for submitting the tax return late, and they’re large (10% of the final bill) so it’s certainly worth being organised and budget for the tax bill. It can be paid in one go or in three separate instalments throughout the year.
As a resident, expats also need to make social security contributions, which are collected by the state directly from salary. This funds the French welfare system that comprises health and sickness cover, family benefits, pensions, unemployment benefit and workplace accident cover. Employers pay around 30% and employees contribute around 18% from gross earnings.
There is also an ‘occupier’s tax’ (taxe d’habitation), which is charged to every household in France, whether rented or owned, and this is the equivalent of the UK’s council tax. The amount owed is based on the average rental cost of houses in the area, multiplied by a locally set percentage. Deductions can be made for the first two children at 10% and subsequent children at 15%. This tax is payable annually or in monthly instalments. A tax is also levied on any TV in the home, and those who don’t have one must declare this on the annual tax return.
Our above guide is intended as a basic introductory guide to the French taxation system, and it is always best to speak to a financial advisor when moving to a new country who specialises in expat taxation to get professional advice.
Information correct at time of publication.