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Who has to pay income tax or who is taxable ?

Everyone who is working or residing in France.

Even if you do not receive an income or if you earn to little, you are still required to fill out a tax return.

The distinction between resident and non-resident has important consequences because those considered to be residents of France are taxed on their worldwide income, subject to treaty exceptions, whereas non-residents are only taxed on their French source. Treaty riles on tax residence override domestic rules.

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When the declaration has to be made ?

Prior to end of March each year.

The declaration can be filled in on the internet or send to the local tax office.

You have to ask for the form at the city hall for the first time. The following years you receive it automatically by post.

Late declarations will be charged with a penalty of 10 per cent.

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Where do I get help to fill out the tax forms ?

Some companies offer such assistance and your local tax office gives advises.

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What deductions can be made on the income ?

Amounts paid for alimony and child support (limited for children over 18 years old) and for dependent parent support.

Moreover, family coefficient rules are used to combine the progressive tax rate with the taxpaying capacity of the household. Then, for example, a married couple with 2 children will pay less taxes than a married couple with no children (on the same income basis).

There are also business deductions and tax credits:
- Tax credits are granted for investment in certain specified real estate, for investment in tourist rental residences in certain areas;
- Tax credits are also granted for domestic employees expenses and, within certain limits, for charitable donations and for child care expenses (depending on children’s age);

It should also be noted that certain losses are tax deductible (certain rental losses and certain professional losses).

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What is the maximum tax rate on income ?

French personal income tax is levied at progressive rates, with a maximum rate of 

48.09 per cent on the final total after deductions.

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When do I have to pay income tax ?

Income tax is not deducted at the source. It’s up to you to put money aside to pay the amount.

You have to choose between 3 payments (15 February,15 May,15 September) or monthly payments from January to October.

The amount of tax to be paid is based on the previous year.

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How to avoid double taxation ?

If you get an income in more than one country, you should enquire at your local tax office in the country of residency.

In the French tax return foreign income have to be declared on a special form.

There are more then 100 international tax agreements, which include specific articles in order to avoid double taxation.

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Are stock options taxable ?

Yes, they are threatened as part of income. Special favourable rules and rates apply to stock-options plans that qualify under French rules.

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What is the “taxe d’habitation” ?

This tax has to be paid by any person who owns, rents or uses a furnished residence. It varies according to the commune and the value of the property and has to be paid annually during the last quarter of the year.

It is always charged on the occupant, whether it is a tenant or the owner, who was in the place the 1 January, even if he leaves a few weeks later.

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What is the “taxe foncière” ?

This is a real property tax, which has to be paid by the owner. It has to be paid annually during the third quarter of the year and the amount is dependent on the location of the property.

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Are there any other taxes ?

- 7.5% social contribution (« contribution sociale généralisée » or « CSG »). The CSG tax is tax deductible at a rate of 5.1% for French income tax purposes.
- 0.5% deficit reduction tax (« contribution pour le remboursement de la dette sociale » or « CRDS »)
- A 2% tax surcharge is levied on passive income and capital gains.

These taxes intend to reduce the social security deficit. 
- “Redevance Télévision” is a licence fee for the use of television. It has to be declared and paid to the “Centre regional de la redevance” (only once per household) When selling TV equipment, the shop has to declare the new ownership to this centre.

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Which indirect taxes do I pay ?

The VAT (“value added tax”) is applied to all products and services. It varies from 5.5 to19.6 per cent depending on the product category.

Prices , that include the tax are marked TTC (all taxes included), otherwise it is HT (without taxes).

Capital Gain tax

Capital gains derived from disposals of shareholdings and real estates are subject to tax in France.

Capital gains derived by a taxable household from the sale of shares, bonds or related funds are taxed at a rate of 16% and are subject to the flat social taxes for a combined total tax rate of 26% (if the total proceeds during the year exceed a certain threshold).

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What about wealth tax ?

Wealth tax is levied on individuals with total net wealth (i.e. after deduction of liabilities) exceeding a certain threshold that is revised annually (720.000 € for year 2003) All items must be assessed at their market value on 1 January of the relevant year.

The tax rate varies from 0.55 percent (exceeding 720.000€) to 1.8 per cent (above 15.000.000€).

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How much inheritance tax has to be paid ?

If a decedent or donor was resident in France, tax is payable on gifts and inheritances of worldwide net assets, unless otherwise provided by an applicable tax treaty.

The applicable inheritance rates vary depending on the recipient’s relationship to the deceased or donor.

The allowance for parents and children is € 46.000. The excess is taxed at rates ranging from 5 % (up to 7.600€) to 40 % (over 1.700.000€). 20% has to be paid for values form 30.000€ to 520.000€.

Développement Christophe Arsonnaud - Chris informatique