With deadlines on the horizon this spring, we will be featuring a number of articles related to taxation in France and important changes to the declaration system in 2017.
Did you know that you may be required to complete an annual tax declaration if you are a legal resident in France?
Many of us expats do not, so in this article we will explain the ins and outs of paying taxes in France. We consider the criteria for becoming a tax resident, what types of revenue are subject to income tax, and provide you with information on how to register for the French tax system.
So when are you considered to be a legal and fiscal resident in France?
You are considered to be ‘fiscally resident’ in France as soon as you step onto French soil if you have the intention of residing here at least six months (183 days to be precise!) in the calendar year. If your spouse and children live in France and you work abroad, you may still be considered a French tax resident. According to Article 4B of the Code Général des Impôts (CGI) only one of the following three conditions need apply:
- Your main economic interests are in France.
- You are working in France, either as an employee or for yourself;
- Your main home is in France;
- What types of revenue are subject to income tax?
- Wages, earnings, salaries
- Unemployment benefits
- Business or rental income
- Non-commercial or agricultural profits
- Capital gains, investment income, savings interest
- Pensions and annuities
- Income from stocks, shares and dividends
Currently you pay income tax on the PREVIOUS CALENDAR YEAR’S revenue. So this year (2017) you will be paying tax on 2016’s revenue.
Why do I need to think about paying taxes in France now?
If you are not registered to pay income tax in France, and you are considered to be a resident, then you are officially breaking the law. Yikes! Fear not, we are bringing you this information now as the requests to complete your tax forms for 2016 will be sent out shortly to those who are already registered. Therefore, if you are not already registered, now is the time to get into the system. (See below for how to register for the first time.) The deadline for submitting your déclaration or tax return of income received in 2016 will be around the end of May, as usual, with the actual date to be released in March.
Old system: Tax collection previously took place three times during the year: the first ⅓ installment due mid-February, the second ⅓ installment due mid-May, and then the remainder (or a rebate!) due mid-September, which represented a reconciliation based on your May filing minus the installments already made. This adjustment received around August is the famous Avis d’Impôt and may not arrive until November for first-time filers.
The French are moving to a new, monthly payment system for 2018.
Note: The French tax year runs January to December.
What are the advantages of declaring your income tax in France?
Once you have declared and filed your first year’s income (déclaration de revenus), you will receive your tax notice (avis d’impôts) from the end of the summer onwards. This is a very useful document as it proves your residency and that you are paying taxes (and therefore abiding by the law) You can also use it as evidence of your income when applying to enter the Social Security system and acquire the fabulous Carte Vitale. Paying into the French tax system can at times be helpful in obtaining a rental agreement or mortgage. There are also many tax advantages in France that could mean that you pay less tax here than in your alternative tax centre. Keep reading…
How can I reduce my income tax bill?
You may be able to benefit from tax credits (crédit impôts), allowances and other concessions. For example:
- La Prime d’Activité (new in 2016, replacing the RSA ‘activité’ and La Prime de l’Emploi) – You may be eligible to receive this if you are working and your income is below a certain level
- Implement energy conservation features in your home;
- Invest money in an assurance vie investment policy (This is a certain type of savings investment account with tax benefits and not term life insurance that pays out on your death);
- Contribute to certain pension plans;
- Give to charity;
- Other tax credits are available for employing domestic help, child-carers (for children under 6), school fees for collège and lycée;
- Declare rental income;
- Other concessions apply if you earn under a certain level, such as a reduction on your Taxe d’Habitation;
- And not forgetting the property purchase schemes that have attractive tax breaks (for example buying under the Loi Pinel).
But I already pay tax in my original home country on some or all of these. Will I be paying tax twice?
France has ‘double taxation agreements’ or ‘treaties’ with many countries to avoid residents paying tax twice on the same income. For instance, if your income is already taxed at source in the country of payment, you will not pay that tax again in France.
If your tax situation is complicated, it is definitely worth finding a good accountant with knowledge of your country’s tax treaty. We can recommend English-speaking accountants.
Right, so I understand that I need to file a tax return, but how do I get into the system?
You can register to pay your first year’s income taxes in one of three ways:
- At your local tax office (Centre des Impôts)
- At your local mairie
- Or online (not for first time filers)
Helpful French phrase: “Je voudrais m’enregistrer pour payer mes impôts, s’il vous plaît.”
(I’d like to register to pay my taxes please.)
Tip: Unmarried couples should complete separate tax returns. If you are PACSed (similar to a civil union) you can choose whether to make joint or separate tax declarations.
From the second year, you will automatically receive your tax declaration form to complete online, and it will even be pre-filled for you, therefore much easier to complete.
Good luck and remember, Renestance is always here help with your French administrative questions – contact us if you would like any further information!
It is worth noting that deadlines for online/smartphone payments and filings are usually five days after the mail-in deadlines, but first-time filers will not have access to online platforms.
Nicole is a bilingual Brit from Cambridge who has been living in the Languedoc since 2002 and is one of the first Renestance's Consultants. She knows how to get things done and can find the key contacts, having worked in real estate, managed two businesses of her own, and started a large social group for English-speakers in the area.
All articles by: Nicole Hammond
Dear Nicole, thank you for your article. I red it with great interest. Please let me know whether you would be interested in a chat on Skype about our respective businesses. Warm, Sophie