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An average €627 tax credit 'windfall' due next week

IF YOU usually benefit from certain tax credits or reductions related to investment in rental property, employing someone at home such as a cleaner or gardener, giving to charity or for dependency costs in a retirement home  – you can expect a ‘windfall’ from the tax office next week.

According to the Finance Ministry, the average taxpayer can expect around €627 to land in their bank accounts – however this is not a gift, it is an advance on tax credits and reductions owing to you.

Due to the new at-source tax system – with tax taken off as income is earned, not with a year’s delay – the government has had to find a new way of factoring in the usual reductions and credits.

It is using your 2018 declaration of 2017 income to see what kinds of expense you usually have giving rise to credits and reductions, then assuming these were ongoing in 2018. Based on this it is giving an amount worth 60% of the total credits and reduction figure as a lump sum into your bank account in mid-January.

Under the new at-source system people will still have to make an annual tax declaration so as to check everything has been taken into account and once you have done so for 2018 income in May/June this year you will receive any remaining sums owned for credits and reductions into your bank account in July this year.

However if you did not have the expected expenses in 2018, you may have to pay something back.

The 60% sum does not include any tax credit that may be owning to you for eco-friendly home improvements you may have done last year or for investments in small businesses; these will be assessed over the summer and paid to you in late summer.

Note that households who usually do not pay income tax because it is cancelled out by credits and reductions are not paying any at-source tax this year, as long as:

  • They did not have tax to pay in the last two years
  • Their net taxable income (revenu fiscal de référence) is less than €25,000 per income tax ‘part’ (eg. per single person or per member of a couple).

Our February edition of The Connexion newspaper has a page on the new prélèvement à la source (PAS). Subscribe at this link by midnight January 12 to receive a copy at your home. Subscriptions start at €13.50 for three editions to a French address and unlimited access to our website.

Questions answered include:

  • I have a pension that is taxed in the UK and then sent to me in France – is it going to be taxed again?
  • I have both French and British  state pensions. Can you advise how to deal with the latter, given that its value is affected by exchange rate fluctuations?
  • I have income from abroad. How will that be dealt with?
  • I live in the UK but will be renting out a property in France. Will I be concerned with PAS?

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Income Tax in France 2023 (for 2022 income)*
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