Tax Demands and Income Tax Payments in France

Unlike the UK, there is no system of PAYE in France, so households wait anxiously to receive their income tax demand once a year. The demands are sent out during August to October, with payment due within a month or so of receipt. Thankfully, the pain of doing so is eased by the knowledge that income tax in France is a comparatively mild form of taxation, and it is possible to pay by instalments. Indeed, nearly half of the population in France do not pay income tax, and up to two thirds will pay less than €1,500 a year. Therefore, for many people the only thing that is going to drop through their letterbox is a notice of non-imposition. As there is no system of PAYE, French income tax is paid in arrears. Accordingly, taxpayers this year will pay income tax on their income earned in 2007. Those whose tax bill is only a few hundred euros are required to make one single payment by the due date. Others either pay by instalment three times a year in February, May and September, or on a monthly basis by direct debit. Whatever your method of payment, make sure you pay it on time, or your liability is increased by 10%, as well as an interest charge of 0.40% per month (4.80% per year) on the outstanding sum. It is not unusual for there to be errors in the calculation of an individual’s tax liability in France. Expats, in particular, suffer from a lack of a proper understanding of how the sometimes complex rules are applied in relation to international taxpayers. The assessment of liability to the social welfare levy (CDG/CDRS) is a particular problem, as we have pointed out here. That is not to say the errors always result in a higher tax charge than should be the case. We are aware of many individuals who appear to us and our advisors of paying less tax than should be the case, either because officials have not properly understood their circumstances, or the tax form has been completed incorrectly and not rectified by French officials. However, do not necessarily assume that errors made in the calculation of your tax liability will not later be picked up, as a proportion of all income tax returns are subject to later review. Accordingly, you may later receive a letter advising you that you appear to have paid too much, or too little. If you do think you have been over-charged (or charged too little!), then you need to take it up with your local tax office. You have up to two years to contest your tax demand (in a process called réclamation), although you cannot withhold payment pending your claim. You must pay the bill, and if you win your claim, you will receive a cheque as reimbursement of the overpaid amount. Similarly, if you are in difficulties with the payment of your income tax bill, it is possible to negotiate a delay in payment with the tax office. You can read more about these and other procedures in our comprehensive Guide to Taxation in France.