How does income tax season in France differ to other countries?

Rob Kay, Senior Partner at Blevins Franks, helps you navigate your way through tax return season

Income declaration season can leave many people, including French citizens, scratching their head

This column is by Rob Kay, a senior partner at Blevins Franks financial advice group ( Rob has decades of experience advising UK nationals in France and features regularly in the media discussing the issues affecting expatriates here.

May can be a lovely month: it is neither too hot nor too cold, and is the perfect time to enjoy the wonderful outdoor life France offers. 

On the downside, it is also tax return season, with the deadline falling around the end of the month, depending on your department. 

Read more: What are the deadlines for French tax returns in 2024?

Avoid leaving your declarations to the last minute since it can get complicated if you earn income from a variety of sources and/or abroad. 

You might have supplementary forms to fill in, depending on where your income has come from, and list all your non-French bank accounts, or life insurance policies on the Cerfa 3916 form, even if you did not earn income or gains from them. 

If your property wealth exceeds the €1.3million threshold, you will also need to complete a real estate wealth tax return. 

How is income taxed?

It seems a opportune time to look at how income is taxed in France. 

It might be next door to the UK, but its tax regime is very different. 

The household/parts system In France, income tax is levied on the total income of the household, including minors, rather than on individuals or spouses. 

This can prove very beneficial for families where one member earns a high income (within limits). 

The family (or household) is divided into a number of parts familiales

The total income is divided by the number of parts and income tax rates applied to this lower figure. 

The computed tax due is then multiplied by the parts to provide a larger number – a system that helps you avoid the higher rates of tax. 

The total number of parts depends on the family circumstances and number of dependent children. 

For example, a married couple’s income would be divided into two parts, with an additional half-part for each of the first two children and a whole part for the third and subsequent children. 

Read more: Useful French vocab for your tax declaration

Income tax rates 

The income tax rate bands and scale rates for this year’s return (income earned in 2023) are: 

  • Up to €11,294: 0% 
  • €11,295 to €28,797: 11% 
  • €28,798 to €82,341: 30% 
  • €82,342 to €177,106: 41% 
  • Over €177,106: 45%

Income above €250,000 and €500,000 can be liable to an extra 3% or 4% tax, depending on whether you are a single taxpayer or family. 

There are some allowances, particularly if you are over 65 years of age or hold an invalidity card. 

Additionally, while pensions, child support and alimony/maintenance are taxed the same as salaries, the taxable base benefits from a 10% deduction each year, up to a limit. 

Various tax credits are available and deductible against the tax payable (not against the income). 

The rules are complicated, so ask your tax accountant to determine which credits are available for your circumstances. 

Social charges 

Social charges – prélèvements sociaux – are a second form of tax on income, levied in addition to the scale rates. 

They are used to finance social security, but do not provide health benefits and are separate from social security contributions (also payable on employment income). 

They are made up of six elements, amounting to the following charges: 

  • Earned income (salaries, unemployment benefits) – 9.7%. 
  • Pensions (retirement or disability) – 9.1% (or 7.4% for low incomes). Only payable if you are subject to the French healthcare system; UK retirees with Form S1 escape this charge. 
  • Unearned/investment income (interest, capital gains, annuities, rental income, etc) – 17.2%. Reduced to 7.5% if you are covered under the health system of another EU/EEA country (including UK nationals with Form S1 who were resident before Brexit). 

Your social charges are usually calculated based on the income declared in your income tax return. 

You will be notified of the amount payable in the autumn, along with your income tax liability demand. 

With some types of income/gain (assurance-vie under special rates, real estate capital gains, dividend/interest advance payment), the charges are paid by the 15th of the following month. 

Tax on investment income 

Investment income is taxed at a fixed rate of 30%, rather than the scale rates of income tax. 

This Prélèvement Forfaitaire Unique (PFU) includes both tax and social charges, so is beneficial for those with higher investment income. 

If you are covered by Form S1, your PFU reduces to 20.3%. 

Households in low-income brackets can opt for the progressive income tax rates, with social charges paid separately. 

Unless you are a low-income household, you should declare interest payments or dividends from abroad within 15 days of the month end and pay the 30% tax. 

Foreign income 

French tax-residents are liable to local tax on worldwide income and gains, and must declare all earnings outside France. 

If you have assets in the UK, for example, the France/UK double taxation treaty determines where you pay tax. 

UK government service pension and rental income is taxable only in the UK. 

That said, you must still declare it on your French tax return (you will receive a credit equal to the French income tax and social charges). 

Real estate gains are liable to tax in both countries, with a credit in France for UK tax paid. 

Gains made on the disposal of capital investments are generally taxed in your country of residence.  

Read more: How long before French home is deemed main residence?

Tax planning 

The tax planning arrangements you had in your former country of residence are unlikely to be effective in France, so you will need to start afresh here. 

Tax-efficient investment arrangements available in France can provide benefits for your heirs too, so take personalised cross-border advice. 

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our, Blevins Franks, understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice