Tax at source in France: Your questions answered

Annual income tax declaration time is fast approaching in France

24 March 2020

Tax credits under PAS

How does PAS work for income tax credits and reductions?

Income tax credits and reductions continue to be taken into account, but there is a gap.

If you have recurring expenses that give rise to a tax credit or reduction – such as paying a cleaner or gardener to work at your home, childcare, gifts to good causes, certain tax breaks for renting out property – you should have had a 60% payment into your account in January of any money owing to you related to this. It was based on your declaration last year, which related to income/expenses in 2018.

The rest is due in July after your declaration this spring of your 2019 income. However, if you did not have such expenses in 2019, you may be due to pay back money received in January.

This system does not apply to tax credits for eco-friendly work in the home.

If you have any money owing due to such work in 2019, it will be paid in summer this year. The same applies for other kinds of tax reduction if you incurred the expense related to them for the first time last year.

Why were 2019 instalments not accounted for in last avis?

Following the move to tax at source last year, I have been paying an instalment each month at a rate set by the tax office. Last year, the amount I paid during 2019 was not offset against my tax bill. I queried this and was told it would be offset against this year’s bill. Is this correct?

You state that your direct debit tax levies taken out during the year 2019 were not accounted for in your avis d’impôt received last year.
This avis you received in 2019 related to your declaration of 2018 income, so that is correct.

Tax instalments taken last year, which would apply to known income streams that France cannot directly tax at source, should be accounted for in your avis this year, 2020, with potentially extra tax to pay or a refund, depending on whether or not what you paid in instalments was correct to cover your real tax liability on 2019 income.

Will capital gains charge rise after Brexit for UK residents?

Will capital gains tax increase after the Brexit transition period for Britons resident in the UK who sell a second home in France. Are you able to tell us what the current rate is and by how much this will increase?

Taxation as such has always been outside the realms of the European Union, so there is no reason to suppose this will change as a result of Brexit. However, it is possible there will be a change in the social charges applied.

Tax is currently at 19%, and the social charges for a French resident are at 17.2% (or 7.5% for non-residents in EU/EEA countries) after the following abatements for length of ownership of the property per full 12-month periods:

Capital gains tax

  • years 1-5: no reduction
  • years 6-21: 6% reduction
  • year 22: 4% reduction
  • Social charges
  • years 1-5: no reduction
  • years 6-21: 1.65% reduction
  • year 22: 1.6% reduction
  • years 23-30: 9% reduction

Adjustments can also be made to the calculation of the gain to account for legal expenses you incurred buying the property and costs of property renovations.

After the Brexit transition period, as the UK will have fully left the EU and its customs union and single market, it is likely that UK residents will no longer benefit from paying reduced social charges due to being attached to another EU/EEA country’s social security system, which was based on rulings by the European Court of Justice.

French rental income and PAS

I live in the UK but will be renting out a property in France. Am I concerned by PAS?

You cannot be taxed directly at source but this rental income falls under the new system of direct debit instalments, and that includes non-residents with regular income from renting out a property here.
In 2020, people who declared rental income as non-residents in spring 2019 (for 2018 incomes) have monthly or three-monthly instalments taken out of their bank account. The amounts
are calculated at a rate based on your previous declaration and the bank account must be in France or the SEPA (Single Euro Payments Area) zone. The UK is currently still in this zone.
There is an option to request modification of the amount of the instalments – and the tax rate applied if applicable – if incomes change drastic-
ally, or to stop the levies if the income ceases.

Is tax taken off every month?

Is tax taken every month for 10 months, like in the old income tax mensualisation instalments?

It is every month if taken directly at source from incomes such as salaries and French pensions, unlike the old system, which was a misnomer as it only applied from January to October. If you previously opted for the 10-month system, you will now probably be paying a bit less each month but with no gap.

For known incomes that France cannot tax directly, instalments are taken from your bank account monthly, or every three months if you request that.

The information here is of a general nature. You should not
act or refrain from acting on it without taking professional advice on the
specific facts of your case. No liability is accepted in respect of these
articles. These articles are intended only as a general guide. Nothing herein constitutes actual financial advice

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