Tax information: going to France
Welcome to the tax guide on going to France, produced by Deloitte. Looking for tax information about leaving France, Click here
This document has been prepared based on the legislation and practices of the country concerned as at 01 April 2009. Tax legislation and administrative practices may change, and this document is a summary of potential issues to consider. This document should not be used as a substitute for professional tax and immigration advice which should be sought for the country of arrival and departure in advance of moving in order to discuss your specific circumstances.
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Before/once you arriveQ. Do I need a work permit to work in France?
A. EU nationals automatically have the right to come to France without any visa and are not required to obtain a work permit or a resident permit.
All non-EU nationals are required to obtain a work permit before starting to work in France, whatever the duration of the stay.
When the stay does not exceed three months, a short stay visa may be necessary depending on the nationality.
For periods exceeding 90 days, all non-EU nationals are required to obtain a long-term visa, "Visa de Long Séjour" before arrival in France. After their arrival, they must request a residence permit.
Q. Should I complete any documentation upon arrival in France?
A. There are no registration procedures for French income tax purposes. However, immigration procedures must be followed.
Q. Is it beneficial to open an offshore bank account compared to an account on the French mainland?
A .Offshore bank accounts do not provide tax benefits from a French perspective but they may be useful from a home country tax perspective. Furthermore, resident of France must declare to the French tax authorities, together with their French income tax return, all foreign bank accounts.
Q. What is the tax year?
A. 1 January to 31 December.
Q. How will I be taxed in France?
A. If you are considered as resident of France you will be liable to French tax on worldwide income. Tax treaties may exempt specific types of foreign-source income from French personal income tax (or a tax credit is granted, depending on the treaty applicable and the type of income), but the exempt income is still taken into account in determining the effective rate of French tax payable on the individual's taxable income. Tax also is levied on capital gains, subject to exceptions.
An individual who is not resident of France is liable for French tax on French-source income only (including income attributed to France by a tax treaty) and on capital gains arising from the disposal of certain assets located in France. In the case of dividends, interest, and royalties from French sources, the tax liability of an individual not resident in France is usually collected by withholding taxes calculated at flat rates. On other income, such as salaries for duties performed in France, profits of a business carried on there, and income from French real estate, an individual not resident in France is liable for personal income tax at the same progressive rates as a resident individual subject to certain minimum rates of tax, and different practicalities of payment.
Q. How is tax residence determined?
A. An individual resident of France, regardless of his or her citizenship, is liable for personal income tax on his or her worldwide income.
You will be considered as resident of France if you meet one of the following criteria provided by article 4B of the French Tax Code:
- Your family home (i.e., the place where you and your family gather on a habitual basis) is in France, or if there is no family home, the principal place of residence in France (i.e., if you spend more than 183 days in France or if you spend more days in France than any other country)
- The principal place of your professional activity is in France (when you perform a professional activity in several countries, you are considered to a be a French tax resident if you spend most of your effective time in France even if this does not constitute the main source of your income)
- Your centre of economic interest is in France
If the individual is considered resident under the laws of France and another country, the relevant tax treaty generally provides “tie-breaker” provisions to determine the country of tax residency.
Q. Are there any regional or state taxes?
A.
No. Provincial, municipal, cantonal and church taxes are not imposed in France.
Q. What rate of tax will I pay in France?
A. French tax rates are both progressive and proportional in relation to your marital status and the number of dependent children.
Your gross total income is determined by adding together all categories of income after applying any reliefs. The net is determined by applying your personal deductions and allowances. This is then divided by a coefficient (see table below) to obtain the net taxable income per share. The tax table rate below is then applied to the result. Finally, the tax computed is then multiplied by the same coefficient to obtain the gross tax burden. However, note that the tax advantage provided by the coefficient system is capped.
The income tax rates range from 0% to 40% (2008 income tax rates see below). In addition, investment income is subject to additional taxes (CSG, CRDS, prélèvement social et contributions additionnelles) of 12.1% (2008 tax rates).
| Taxable income per share From |
To | Tax rate |
| 0 | €5,852 | 0% |
| € 5,852 | €11,673 | 5.5% |
| €11,673 | € 25,926 | 14% |
| € 25,926 | € 69,605 | 30% |
| € 69,605 | and above | 40% |
Q. What tax deductions and allowances are available in France?
A. The following expenses are deductible from gross income, within certain limits and under certain conditions, in order to determine the net taxable income:
• Social security contributions, excluding part of CSG tax and all of the CRDS tax
• Retirement pension contributions
• Alimony payments made pursuant to a court order
• Support payments to a child over 18
• Support payments to ascendants
• Deductible CSG paid on investment income received previous year
Allowances
In France, tax relief is provided to families by means of the income splitting or unit system, rather than by personal deductions or allowances. Under this system, the total taxable income of the family group is divided into a number of units and the tax applicable to a single unit is multiplied by the total number of units to arrive at the total amount of gross income tax .The following table shows the number of units corresponding to the most frequent family status.
| Units Under the Income-Splitting System | |
| Family Status | Units |
| Single adult | 1 |
| Married couple & PACS | 2 |
| Married couple with 1 child | 2.5 |
| Married couple with 2 children | 3 |
| Each subsequent child (married couple);PACS | 1 |
| Single adult with 1 child | 1.5 in case of common law marriage 2 if he lives alone with the child |
| Single adult with 2 children | 2 or 2.5 depending if there is a common law marriage or not |
However, the tax advantage provided by the coefficient system is capped for each half unit over 2 parts (for married couple) or 1 part (for a single individual).
Tax Credits
In addition to the income-splitting system described above, the main tax credits are provided to French tax residents only are the following:
- Major domestic equipment expenses in principal residence
- Child care costs
- Charitable contributions
- Domestic employees costs
- Educational expenses (standard tax credits)
Q. I will also be paying tax in my home country. Am I being taxed twice?
A.
If you are from a country with which France has a double taxation agreement, you may be able to claim exemption or partial relief. The precise conditions of exemption or relief can be found in the relevant agreement.
Q. Do I need to file a French tax return?
A. If you are liable to income tax you must file a tax return.
Q. When does it need to be filed?
A. French tax residents must file their tax return by 31 May following the calendar tax year. For non-residents the filing deadline varies between 30 June and 15 July, depending on the country of residence.
Q. Can the filing deadline be extended?
A. Individuals resident outside France have permitted extensions of the time limits stated above, depending on the country of residence. Extension of time for filing the French tax return for residents or non-residents of France is not allowed and late filing can result in application of a 10% penalty.
Q. What is the procedure for paying tax?
A. Income tax is not paid with the French tax return.
Residents of France usually receive from the French tax authorities their tax bills, "avis d'imposition", for a final payment due date on September 15th of the year following the tax year in which the income was earned.
Tax is normally paid in one installment in the year following the year of arrival in France. For subsequent years, tax is generally paid in three installments (February 15th, May 15th and September 15th of the year following the tax year in question). You may wish to request that the tax authorities collect your prior year income tax liability in monthly installments withdrawn automatically from your personal French bank account.
Q. Can I file a joint tax return with my spouse?
A .France taxes the family unit and, as a general rule, a married couple cannot file separate income tax returns.
Q. Will non-cash compensation be taxable (e.g. housing)?
A. In principle, all employment income is subject to tax. Only items specifically exempt from French income tax are not subject to tax. Employment income includes salaries and benefits-in-kind. The taxable benefit is determined depending on the type of benefit provided.
French tax law provides some favorable tax regimes for “inpatriates”.
With regard to individuals who arrived in France before January 1, 2004, the 1997 French tax regulations apply.
Based on a regulation issued by French tax authorities in 1997, foreign employees assigned to France are subject to a favorable tax regime in respect of certain expatriate allowances (considered professional expenses). A certain number of allowances and reimbursements typically received by expatriates assigned to France may be subject to exemption from French income tax. Exemption is subject to the condition that the individual was not resident in France in the year preceding the year of arrival and is assigned to France for a period of six years or less.
With regard to individuals who arrived after January 1, 2004, Article 81 B and C of the French tax code apply.
The amended Finance Act of December 30, 2003 introduced an important tax provision in favour of assignees coming to work in France (article 81B of the French tax Code). Furthermore, an administrative regulation concerning the favourable tax regime applicable to inpatriates was issued on March 21, 2005 and is immediately applicable.
The tax regime is applicable for employees transferred by their foreign employer to a French entity with effect from January 1, 2004, and is applicable for a maximum duration of 5 years, provided that the individuals have not been resident in France for tax purposes during the ten years preceding their assignment. This residency period has been reduced to five years for the assignees coming to work in France as of January 1, 2005.
Further to this tax regime, compensation elements relating to the assignment in France, typically housing, cost of living allowances, mobility premiums, taxes paid by the employer, etc., which are specified in an addendum to the contract of employment or in an assignment letter, will be exempt from income tax in France. There is no exhaustive list of compensation elements that can be exempted.
The law does, however, state that the taxable remuneration in France of an inpatriate (resulting from this new regulation) should not be lower than the taxable remuneration a local employee would receive in an equivalent position in the French company (or in similar companies). The regulation specifies that employee stock plan gains or income from employee savings plans should not be included in the taxable compensation used to determine the comparison.
In addition, further to this regime, it is also possible to exempt from tax the portion of remuneration relating to overseas workdays. This exemption is however capped to a certain limit.
Finally, for individuals coming to work in France as of January 1, 2008, the above inpatriate regime has been slightly amended and has also been extended to individuals who are directly hired by a French company to the extent that they have not been tax residents of France at any time over the 5 years preceding their contract in France.
It is important to note that the tax regime applicable to salaried personnel on assignment prior to January 1, 2004 (the above-mentioned preferential regime under the administration regulation issued in 1997) will continue to apply.
Q. I will be working in different countries while living in France. Will all of my employment income be taxable in France? A. If you are resident of France then you will be subject to French tax on your worldwide income. However tax treaties may be used to mitigate any potential double taxation if you are also subject to income tax in another location.
Q. Will I pay French tax on investments and rental income generated in my home country?
A. If you are resident of France, you will be subject to French tax on your worldwide income. However tax treaties may exempt specific types of Foreign-source income from personal income tax (by applying the effective rate of taxation method or granting a tax credit).
Q. Is there a Capital Gains Tax regime in France?
A. If you are resident of France, capital gains from the disposal of business assets are taxed as part of your business income. All non-business gains (other than those derived from securities) are taxed at progressive rates, subject to various exemptions. The main exemptions are;
• Gains from the disposal of furniture, household appliances and private motor cars;
• Transfer by gift or on death (although gift or inheritance tax may be due).
Capital gains arising from the sales of shares held purely for investment purposes are usually taxed at a flat rate of 30.1% (18% capital gain tax + 12.1% additional taxes, but only if sales proceeds in the taxable year exceed a fixed ceiling (for 2008 € 25,000 and for 2009 € 25,730).
Capital gains arising from the sale of real estate are also taxed at a flat rate of 28.1% (16% capital gain tax + 12.1 additional taxes). However, note that exemptions are provided by French tax law (notably capital gains realised on principal residence are tax-free).
If you are not resident, gains on the disposal of business assets remain taxable as business income. The only non-business gains that remain taxable whilst non-resident are those arising from the disposal of real estate located in France or shares in unquoted French real estate company, shares in French company in which a substantial interest (more than 25%) was held within the preceding five years, and goodwill in a French enterprise.
Q. What do I need to know about any other tax regime, e.g. Inheritance, Estate or Wealth tax?
A. Inheritance and gift taxes apply to the worldwide assets of individuals domiciled in France and to assets located in France if domiciled elsewhere unless tax treaties provide otherwise.
In addition there is a wealth tax that applies to individuals whose net assets exceed certain value as at 1 January each year. If you are domiciled in France then you are liable to wealth tax on your worldwide net assets. However, individuals who became French tax residents as of August 6,2008 and have not been tax residents of France during the last five years are exempt from French wealth tax on their foreign assets. This exemption is granted until the fifth year following the year of their arrival in France. In addition, some international tax treaties concluded with France provide for a certain exemption period. If not domiciled in France you will be liable on the value of your French located assets (French financial investment are however exempt). Business assets, antiques and works of art are exempt from wealth tax. It is necessary to file annual wealth tax returns if the value of the net assets exceeds the threshold for liability on 1 January of the year.
The French dwelling tax, "taxe d'habitation", is due by any individual who, on January 1 of the given tax year, has at his disposal a personal residence, regardless of whether rented or owned. The dwelling tax is assessed as a function of the fair rental value of the residence and varies depending on the location of the residence. As a rule, the dwelling tax is not determined as a function of the taxable income of the individual (although there may be reductions for individuals with very low income levels).
The French real estate tax, "taxe foncière", is an annual tax due by owners of French real property. The amounts due also depend on the value and the location of the residence.
Q. Will I be required to pay French Social Security?
A. Employers and employees are liable for a number of social security contributions. Employers generally withhold employee contributions. Foreign nationals working in France may be required to contribute to French social security funds. However, partial or complete exemption from French social security contributions is possible if you remain covered by your home country scheme in accordance with a social security treaty or EU regulations.
