Five musts when you fill out your French tax return

Talk to almost anyone about living in France and the conversation will normally focus on the sunshine, culture and great food.

Then the topic invariably turns to tax. There is a sigh, a sharp intake of breath and often a line my car mechanic likes to use before delivering the bad news: “Oh, it’s going to cost you!”

Half of households in France do not pay income tax

These attacks on tax make many people rethink the idea of a move to France and decide that it would be more sensible to stay where they are and save their money.

Consequently, they limit their time in France to holidays and, at most, a second home, timing arrivals and departures with military precision to get around visa requirements, and trying to manage the anxiety of all that moving around.

Read more: Second-home owners in France can get information on new Etias website

Shocking, then, to learn that half of households in France do not pay any income tax at all, and that most couples retiring to France pay significantly less tax than they did in the UK.

UK S1 holders can avoid social charges on pensions

In my opinion, not living where you want to live because of unsound financial assumptions is a tax on ignorance.

If good decisions are based on good information, is it not worth finding out what your tax position would be, as a French taxpayer, before making potentially life-altering decisions?

We find that, on average, couples retiring to France pay around a third less in taxation compared to the UK, which is hardly insignificant.

New movers frequently contact us assuming there is an error on their tax bill when they discover it is much lower than expected.

There are many reasons for this, including the ‘parts’ system, which ensures income is split evenly between a couple to make certain that all allowances and thresholds are maximised.

Those of retirement age and holding an S1 form from the UK will also avoid social charges on their pensions, which means they are even better off than the locals, who have to pay 9.1% on theirs.

Implications for property taxes

More great news is that the taxe d’habitation has been abolished from this year for all main homes, which means one less tax to think about.

The other local tax remains, the taxe foncière, but there are exemptions based on your age and your income.

Note, however, that the taxe d’habitation remains in place for second homes.

Another consideration is the tax applied to properties that are left vacant.

Read more: Taxe foncière, taxe d’habitation: how are these worked out in France?

Channel Island investments not always answer

When it comes to savings, we sometimes see people put their money in the Channel Islands in a bid to simplify declaration and reduce tax, whereas it is possible to do this in France perfectly legally.

In fact, when declaring income from the Channel Islands (as you legally must) you can end up paying up to 45% tax whereas you can pay as low as zero if investing in France and complying with French law.

This is because there are ways of investing that mean withdrawals are merely deemed return of capital and not gains or income.

Moreover, there are special fixed rates of tax, which are often lower than being taxed at progressive rates via the tax declaration.

In short, there are many financial gears and levers in France. You just need to know what they are.

For those already living in France, there are some pertinent points to consider when completing this year’s annual tax declaration.

1. Declare all your bank accounts

This is something I repeat every year because it is very important indeed.

The fine is €1,500 per undeclared account. Trying to hide money, even by omission, can get very expensive.

Read more: French income tax: More people caught out over foreign bank accounts

2. Declare all your property

New this year, you have until June 30 to do so. This applies to all owners of real estate for residential use, individuals and companies.

The status (main residence, secondary residence, rental investment, vacant, etc) of the property must also be disclosed.

This can be done on the Gérer mes biens immobiliers (‘Manage my property’) area on impots.gouv.fr

Read more: Declaring French property: exemptions, rents, joint owners, commercial

3. Declare your S1 form

If you have an S1 form from the UK (or elsewhere in Europe), be sure to declare it.

You can find the appropriate place in boxes 8RP and 8RQ (if declaring on paper these are on form 2042C).

This will, where applicable, save you paying social charges, or reduce them from 17.2% to just 7.5%.

4. Declare drawings from investments as income

Especially where French tax-efficient structures are concerned, such as an assurance vie, it is important to identify the revenue imposable, which often bears no relation to either the amount drawn or even the money earned.

We often see couples who declare too much, whereas the taxable amount is below the point where they pay any tax at all.

5. Get professional advice

Unless you are confident you understand local and international laws and double tax treaties, it makes sense to get professional help when planning for residency and completing declarations.

By avoiding the pitfalls, you can get on with enjoying the great lifestyle France has to offer.

Related articles

Guide: Income Tax in France 2023 (for 2022 income)*

How do tax inspections work in France, are foreigners more at risk?

Moving to France post-Brexit: researcher wants to hear experiences