Do I need to file for income taxes in France?
In essence, you become French tax resident when you start living in France in a regular and continuous manner. The Code Général des Impôts says it is when one of these conditions is met:
− Your family home is in France
− Your main place of residence is in France
− You carry on a professional activity in France, salaried or not (unless it can be shown to be a secondary activity)
− The centre of your economic interests is in France
If any condition is met, you and your household are seen as subject to French taxes (and not assessed separately as in the UK). In general terms, your household’s “worldwide income” has to be declared and double taxation agreements decide the tax situation.
What happens if I do not declare or declare incorrectly?
Anyone not submitting returns or not reporting income fully and correctly could face significant fines if seen as acting in “bad” faith. Tax surcharges or interest may be applied for late payment and fines start at €1,500 per account for not reporting foreign bank accounts. Tax offices are now less lenient.
How far back can the tax office go?
Tax offices usually go back three years, but can go back six. In the absence of returns, they can reconstitute your income based on bank statements. Proving that some bank movements were not income, can be an arduous and stressful experience.
Advantages of submitting returns
Advantages include: staying in the tax office’s good books, possibly paying less tax than in other countries, proof of tax residency allows capital gains exoneration on the sale of your main home in France.
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