Income taxation in France

The French income tax system is complex, and foreigners in France are subject to a relatively heavy tax burden. In certain circumstances, foreigners may elect to become French citizens to gain tax relief.

Tax residents in France are required to pay tax on income earned worldwide (impot sur le revenue). They declare income earned during a calendar year before March 1 of the following year. Tax declarations are made to the tax inspector (Inspecteur des Impots) and the appropriate tax is paid to the public treasury, the Tresor Public, or to the local Centre des Impots.

French income tax is assessed on a family basis in accordance with a progressive schedule that ranges from 0% to more than 40%. Income of married couples is divided into two parts. If they have children, an additional half-part is assigned to each of the first and second children, and a whole part for the third child—as well as each subsequent child.

In France the husband is responsible for filing the tax return. The return must include the income of his wife and all children who are still in the educational system or in military service. Depending on personal circumstances, tax reductions (abatements) may be allowed.

Taxable income is determined by deducting allowances from total income and then dividing the net amount by 1 for single and no children; 2 for married with no children; 2.5 for married with one child; and by 0.5 for each additional child. For example, a married couple with 6 children would divide the net amount by 5 to determine taxable income.

Divorced, separated or widowed persons receive allowances for the following expenditures: major property repairs; certain ‘green projects’; support of dependent adult family members and relatives; certain donations; Securite Sociale contributions; approved life insurance premiums; interest payments on certain loans; and, special arrangements for single parents with young children.

Suspected tax fraud is investigated in France by authorities who use harsh methods. As deemed appropriate, certain complex tax declarations are assessed according to the punitive regime de d’ imposition forfaiture. By this method, income is assessed by arbitrary means. Authorities can ascribe a letting value or rental to all properties the taxpayer owns and multiply that value by, say, three or five. Cars can be taxed at 75% of the new showroom value. Servants are presumed to have large incomes, and race horses are assumed to be winners. Earnings, pensions, rental incomes, and various forms of interest and capital gains are taxed at a fixed ratio of 18%. Although used infrequently, this punitive system provides a means for authorities to discourage tax abuse while dealing with tax residents who try to beat the system.

A taxpayer who has already filed a previous return will be sent the necessary forms with personal details and figures for French earnings included. Many tax forms can be involved, such as the following ones that cater to the expatriate community:

• 2042–A main form that shall include all income, worldwide.
• 2042 C–For those who have a personal business and/or those who are paying taxes to the United Kingdom.
• 2047–For foreign income–must be used by anyone receiving money from abroad.
• 3916–Used by those with bank accounts outside of France.

by V Bright Saigal, AboutFrenchProperty.com - Copyright © About French Property