Charity donations and ‘at-source’ taxation in France

We live in France and are thinking of making a donation to charity, allowing us a personal tax reduction, as we have done in the past. Could you explain how this works with France’s new tax-at-source system? When will we get the tax reduction/credit?

26 February 2020
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Your question is timely because, in January, the minister responsible for tax policy, Gérald Darmanin, said tax reductions for donations will soon be contemporanéisé (a technical word but basically meaning they will be brought forward).  

The plan is that donations given to registered associations, which lead to tax relief, will be declared to the tax authorities both by the receiving bodies and the donors soon after the sums are donated and thus the tax credit applied earlier.

Amounts relating to this would then appear in the pre-filled-out parts of the tax declaration.

Under this system, donations made in 2021 will be included in the tax reduction payments sent out in 2022 (60% in January 2022 and 40% in August 2022).

This is a marked improvement on the present system where donations made in 2019, for example, will only be taken into account in the January 2021 tax reduction payments. 

It is expected that tests will now be carried out in several tax areas to make sure the system works smoothly before it is generalised, with a start date of the 2022 tax year.

The declaration system is expected to be internet-based.

One problem identified is the potential for the tax authorities to know exactly who is giving how much to each association, which could cause problems with bodies associated, for example with political parties.

To bypass this, an automatic step which hides the name of the association before it gets to the tax authorities will be built in from the start.

Tax experts say the change will probably increase the amount of tax credit claimed because associations will be more motivated to make declarations than individuals.

It will also mean the state will face a catch-up year, where people claiming tax relief under the present system will get their payments at the same time as they get payments declared under the new one. Estimates put the cost of this to the state at €1.2billion.

 

This question was answered by Olaf Muscat Baron who is a Fellow of the Chartered Association of Accountants UK, a French expert comptable and an International tax advisor.

He is the principal accountant of Fiscaly, an accountancy firm based in the Dordogne.

See www.fiscaly.fr or call 09 81 09 00 15

Email your tax questions to news@connexionfrance.com

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