Taxes in France

1. Introduction
2. Top Tips
3. Liability to French Income Tax
4. Your French Income Tax Return
5. Calculating Your Income Tax Liability
6. Payment of Income Tax
7. Social Charges/Social Security Contributions
8. Taxation of Investment Income
9. Local Property Taxes
10. Wealth Tax
11. Capital Gains Tax
12. Gifts Tax
13. Tax Investigations
14. Complaints System

1. Introduction

The French system of taxation can be characterised by its complexity, high marginal rates and high administrative costs.

There are so many different basis of assessment, and such a large number of taxes that it defies easy description.

While there are a set of principles that govern the operation of the system, there are so many exceptions to the general rules that it is sometimes difficult to appreciate that any exist at all!

However, it would be a mistake to assume that France is a high taxation country for everyone. Those who relocate to France to retire are likely to be pleasantly surprised at just how little in taxes they will pay.

There is very a progressive form of income tax, and EU expats of retirement age escape the payment of social security contributions on their pensions.

Local rates are generally more favourable than in many other countries, and there are lower levels of taxation on property rental profits, an important source of income for many international residents.

Despite the existence of a tax on wealth, and the alarmist stories that appear from time to time in the international press about this subject, you need to be a Euro millionaire in France to pay any wealth tax.

Neither are inheritance taxes as onerous as professional tax advisors would sometimes like you to believe, but it would be churlish to say their dire warnings were driven by any commercial motive!

That having been said, France is not the most fiscally attractive destination of choice if you want to work, or to set up a business.

Sadly, for employment groups, the main problem is the level of social security contributions, which makes France one of the most highly taxed countries in the world.

The regressive nature of some of the social security contributions penalises working households on low incomes, and is a major burden on employers and the self-employed, largely offsetting the beneficial effects of the progressive income tax system.

The process of submission of your income tax return is a complicated one and if you under-declare your income the French tax authorities have a fearsome reputation for imposing severe penalties.

Nevertheless, there is a presumption on the part of the authorities that you have made the return in good faith, and an expectation that there will be errors.

So when problems occur, for the most part things are resolved in an amicable manner, without sanctions.

Indeed, for most people, the greater risk is that you will overpay your taxes, simply because the whole thing is so complicated that you do not take best advantage of the concessions the system has to offer or that local tax offices make errors in your assessment!

Next: Top Tips