Once a resident in France, you are liable to pay taxes in France on your income worldwide. The French social security system is one of the most generous in the world but it’s paid for by high social charges and French taxes.
France’s tax system can be tricky to navigate. Between income taxes, social security contributions, and taxes on goods and services, there’s a lot to keep track of! Thankfully, as long as you do your research and seek expert advice when needed, you can avoid most major pitfalls.
This guide on taxes in France sets out a basis only, and expert advice should be consulted for your individual tax situation.
Elitax’s services span the full spectrum of tax advice, assistance, and support to meet the specific needs of the individual expatriate in France. Their primary focus is income and wealth tax returns, where they assist expats on positioning, preparation and processing of the returns during thorough personal consultations. Elitax also provides tax representation, tax training and tax audit support.
The guide covers:
- The tax system in France
- Federal taxes in France
- Local taxes in France
- Taxes on goods and services (VAT) in France
- Who has to pay tax in France?
- French tax refunds and credits
- French tax system for foreigners
- Income tax rates in France
- How to file your income tax return in France
- Social security taxes in France
- Tax on property and wealth in France
- French capital gains tax
- Inheritance tax in France
- Company taxes and VAT rates in France
- Tax advice in France
The tax system in France
There are three main types of personal taxes in France:
- French income tax (impôt sur le revenu)
- Social security contributions (charges sociales/cotisations sociales)
- Tax on goods and services (taxe sur la valeur ajoutée TVA, or VAT, in France)
You will also have to pay occupier’s tax (taxe d’habitation) or French property tax (taxe foncière), and if you’re selling land or property or have assets more than €1.3 million, there may be capital gains tax to consider, too.
As of the beginning of 2019, the Pay-As-You-Earn (PAYE) system is used universally throughout France. Instead of filing an income tax and paying whatever taxes you owe for the prior year, you’ll be taxed right at the source of the income, in monthly payments. Income subject to PAYE also includes retirement income (such as pensions or annuities), relevant overseas income, sick and maternity leave, and rental income.
Federal taxes in France
Taxes in France are extensive. In fact, as someone who lives in or makes money from France, you may pay taxes on the following, among others:
- personal income on an annual basis
- corporate or business income
- purchased goods and services
If you don’t plan to use an accountant, be sure to do your research thoroughly so that you don’t end up facing fines or penalties.
Local taxes in France
Local residence tax: taxe d’habitation
If you are renting somewhere in France, you may have to pay taxe d’habitation (local residence tax). Starting in 2020, though, if your taxed income is below a certain threshold, €27,432, you won’t have to pay any property tax. Above this, you’ll have to pay a certain amount. For specific amounts in 2020, refer to this link.
The amount of this French property tax depends on the size and condition of the property, as well as the rates set by the local communes. High-value homes are also subject to an extra prélèvement pour base élevée et sur les maison secondaires of 0.2% for primary homes, if the rateable value exceeds €4,573; 1.2% for secondary homes if the rateable value is from €4,573 to €7,622; and 1.7% for values above €7,622.
TV license tax
The redevance audiovisuelle (currently €139) is a tax on having one or more televisions (you’re only charged once) in your house, even if you only use it to watch DVDs, and appears on the same French tax bill. If you don’t have one, you have to declare this on your annual tax return in France.
Taxes on goods and services (VAT) in France
Taxe sur la valeur ajoutée or TVA – VAT in French – is a tax on certain goods and services, which is included in the sale price. The standard VAT rate in France is 20%. However, there are reduced French VAT rates for certain pharmaceuticals, public transport, hotels, restaurants, and tickets to sporting/cultural events (10%); food and books (5.5%); and newspapers (2.1%)
Can you get a refund on VAT?
If you’re not a resident of the EU, you may be able to apply for a VAT refund. The process can be tedious, but you’ll need receipts of items purchased (totaling at least €175.01 or more); all the items should have been bought on the same day and should come from the same store. Be sure to ask for the Detaxe form before you leave the store and ask if they have a tax refund desk where you can get the VAT refund there and then. If not, take the Detaxe and your receipts to the VAT desk at the airport; you can complete the process before you check your bags and enter security.
Who has to pay tax in France?
You’re liable to pay taxes in France if:
- France is your main place of residence or home – if your spouse and children live in France and you work abroad, you may still be considered a French tax resident.
- You are resident in France for more than 183 days in a calendar year – not necessarily consecutively.
- Your main occupation is in France.
- Your most substantial assets are in France.
French tax refunds and credits
You may be able to reduce your tax bill with French tax refunds, allowances and concessions.
French tax refunds are granted for a range of expenses, including:
- la prime pour l’emploi or PPE if you are working in a professional capacity and you earn under a certain level
- employee social security contributions
- any professional/employment-related expenses (up to €12,305)
- if you support a person in your home over the age of 75
- rental losses from unfurnished properties (up to €10,700)
- losses from business or professional activity
- child support payments for minors not part of your fiscal household
- energy conservation works on your home
- if you invest money in or contribute to an assurance vie investment policy
- if you are on a low income you might be able to get relief from local French property taxes
You can visit the local Caisse d’Allocations Familiales (known as La Caf) to find out what French tax refunds are available and how to apply.
French tax system for foreigners
Non-residents of France are taxed on income earned from French sources. So, even if you’re not living in France permanently but you do work for a French company, you’ll get taxed on that income. That said, France does have tax treaties with a number of countries that enables residents of certain countries to avoid dual taxation.
France is signed on to the Automatic Exchange of Information (AEOI), which seeks to fight tax evasion by requiring financial intermediaries to be transparent about their clients’ tax residence in signatory countries.
Income tax rates in France
Income tax rates in France depend on whether you’re single or married, whether you have kids and, if so, how many, as well as your income and whether you’re self-employed. With all these variables, it’s probably a smart idea to get specialized tax help!
Personal income tax rates for residents
Official residents pay French taxes on worldwide income, which includes earnings from employment, investments, dividends, bank interest, pensions, and property. The income tax rates in France in 2020 are as follows:
- Up to €10,064: 0%
- €10,064–€25,659: 11%
- €25,659–€73,369: 30%
- €73,369–€157,806: 41%
- €157,806+: 45%
Personal income tax rates for non-residents
Non-residents usually pay tax on their France-sourced income at a minimum French tax rate of 20% for French-sourced income up to €27,519 and 30% for income above this threshold. Property tax in France for non-residents on the taxable gain of the sale of a French property is 19% for EU citizens and 36.2% for all others.
How to file your income tax return in France
Thanks to the new PAYE system, for every monthly salary you receive, you’ll be paying your income tax there and then, in real-time. This’ll be the case for various sources of income; for example, if you are traditionally employed, your employer will deduct your income tax from your salary and pay it directly to the tax authorities. Generally, exceptions to the PAYE system include investment income (including gains from life insurance policies), capital gains from financial investments and real estate, and non-French income.
Filing general tax returns
If you need to complete a tax return and have previously submitted one, you will probably be sent a completed form automatically, for you to check, amend if necessary and return. If you don’t get one or if it’s your first time, you can get one from your local tax office (centre des impôts) or mairie, or online through France’s Finance Ministry.
It is your responsibility to make sure you complete and submit your French tax return, even if you think you will fall below the income threshold to pay any French tax.
The filing deadlines change yearly, and deadlines are announced in March or April of the same year. So, for 2020, you’ll know the deadlines by late spring of 2020. For 2019, you had to return the tax declaration by 16 May for the previous year, if you filed a paper declaration. Those completing online tax returns had to do so between 21 May and 4 June, depending on their location.
Unfortunately, if you don’t meet the deadline, you’ll incur a fine of 10% of your tax bill. Read more in our guide to filing a French tax return.
Self-employed income tax in France
In France, if you are self-employed and the only employee (for example, a freelancer), you’re considered a micro-entrepreneur and you benefit from a tax status that greatly simplifies your tax and accounting requirements. This means that, for income taxes, you’ll file under the standard personal progressive rates. However, if you own a larger businesses that cannot fit under the micro-entrepreneur status, you file taxes through the normal regime réel, where your income tax and social security contributions are based on profits and appropriate business costs are deducted.
Filing US taxes from France
Despite the fact that every US citizen and Green Card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from France, see our guide to taxes for American expats.
Social security taxes in France
Social security contributions (charges sociales or cotisations sociales) are collected by the state to fund France’s welfare system: French healthcare and sickness cover, family benefits, pension, unemployment benefit and workplace accident cover.
Nationally, the charges are split between the employer and the employee, with employers paying around 40–45% and most employees paying around 20–25% of gross earnings. The employer deducts the money from the salary every month. The self-employed pay around 40% of their earnings in social charges once their businesses are up and running.
Read more in our guide to French social security.
Tax on property and wealth in France
French property tax: Taxe fonciere
If you are buying or already own a property in France, you will have to pay the taxe foncière or French property tax, even if you’re renting it out. The bill for the taxe foncière arrives in the last quarter of the year and the amount is based on the estimated annual rental value of the property multiplied by a percentage set by the commune (ask for more information at your local mairie). You can pay the tax in installments or in advance by monthly direct debit.
The taxe foncière rate for a primary home is around 1%, and 3% for secondary homes. Similar to the taxe d’habitation, it also includes the extra prélèvements pour base élevée et sur les maison secondaire tax but no tax relief is offered for children. You’ll also need to arrange insurance.
Usually taxed along with taxe fonciere is the Taxe d’Enlèvement des Ordures Ménagères (TEOM), which is how a locality charges for waste collection services. Some localities decide to fund this service through their general budget, but many choose instead to tax residents.
French capital gains tax
Capital gains tax in France (impôt sur les plus values) is payable on the sale of buildings, land, and shares.
Starting in 2018, a single flat-rate tax of 30% is applied on savings and investment income and gains – comprising of income tax at 12.8% and social charges of 17.2%. This tax doesn’t apply to capital gains on the sale of property, which instead stands at 36.2%.
French wealth tax
In 2018, a tiered system of wealth tax was introduced, with the charges as follows:
- €800,000 to €1.3 million: 0.50%
- €1.3 million to €2.57 million: 0.70%
- €2.57 million to €5 million: 1%
- €5 million to €10 million: 1.25%
- €10 million+: 1.5%
As a reminder, non-residents are only taxed on French assets, while residents are taxed on all assets worldwide.
Inheritance tax in France
Inheritance tax in France is notoriously complex. For deceased residents of France, all worldwide assets are subject to French inheritance tax, while all French-based estates are subject to tax even if the beneficiary isn’t a resident in France.
For non-residents, many bilateral tax treaties with France provide exemptions for paying French tax on worldwide assets.
In general, after any applicable deductions and exemptions, plus after adding back any gifts given from the deceased within the prior 15 years, the inheritance rates are:
- Up to €8,072: 5%
- €8,072–€12,109: 10%
- €12,109–€15,932: 15%
- €15,932–€552,324: 20%
- €552,324–€902,838: 30%
- €902,838–€1,805,667: 40%
- €1,805,667+: 45%
Siblings of the deceased are taxed at 35% for amounts up to €24,430 and 45% for more, after a French tax refund of €15,932. Others will be taxed at 55% or 60% depending on their relationship. More information is available in our guide to French inheritance tax.
Company taxes and VAT rates in France
When you are running your own company in France, you may be taxed under the personal income tax system (Impôts sur le Revenu, IR) or French corporate tax system (Impôts sur les Societiés, IS). If you are operating as a sole trader or freelance worker under the new micro-entreprise regime, you will pay tax and social charges based on turnover (income from your business) under the micro-fiscal simplifié system.
Tax advice in France
If you are facing down your first tax cycle in France or if you have to navigate multiple tax laws – say, if you’re self-employed or if you’ve inherited some money – it’s wise to get an accountant. They can advise you on your financial options and help you avoid errors and fines.