Expats living in France will need to understand the basics of French tax law to avoid penalties.
If you are a resident in France you are likely to be required to complete a French tax return, primarily to cover tax on your income, property sales or have significant personal wealth. As in the UK, you may also be liable for capital gains tax on gains main from the disposal or sale of assets.
French double tax treaties
Since December 2009, the UK and France have had a double taxation treaty in place which means that you can legally avoid being taxed for the same income in both countries – however you will have to pay tax somewhere. If you are not a British Expat, you should check to see if your home country has a tax treaty with France.
Are you a tax resident in France?
At a basic level, if you spend more than 183 days in France you would be considered a tax resident. However, you will also be considered a tax resident if France was considered your main residence.
French income tax information
Permanent residence in France are required to pay income tax on their worldwide income. One of the major differences between income tax in France and income tax in the UK is that, unlike in the UK, income tax in France is calculated based on the household income – not the individual’s.
The income tax owed is based on the number of individuals in the household. That is, the total income of the household divided by the number of “parts” in the house. Typically one person is the equivalent of one part, with the exception of the first two children who are counted as half a part.
Therefore if you are a household with two adults and a single child, your income tax band will be calculated by dividing the total income by 2.5 (i.e. 2 parts and a half for the first child). This is compared to a household which has two adults and five children which will be divided by 6 (two parts for the two parents, 1 part for the first two children and 3 parts for the next three children).
However, the two adults need to be either married or in a formal civil partnership, otherwise only one of the parents can claim responsibility for the household.
Once the tax band has been established, the tax calculation can then be made.
Typically, the larger the French household, the smaller the tax bill is likely to be.
One other major difference between the UK and France income tax is that in France everybody is required to complete a tax return. Tax is not deducted at the source of income which means that when the tax bill is due at the end of the year, you must have the money to pay.
The French tax year and completing a tax return (déclaration de revenus)
The French tax year is the same as the calendar year (i.e. January to December) and tax returns need to be submitted by the end of May if submitting offline or the end of June if you are submitting online.
The French tax return is called a déclaration de revenus and is required if you are a resident in France and receive an income. If you are married or in a legally recognised civil partnership you can choose to submit individual or joint tax returns. If you are unmarried, you are required to submit individual tax returns.
Late filing penalties
If you file your tax return late, you will be faced with a fine of 10% of your final tax bill.
Paying your tax bill
Thankfully, the French government does not require you to pay your tax in one instalment. You are entitled to pay in instalments in February, May and September or monthly by direct debit.
Other taxes for expats in France
Aside from your income tax, you are also required to pay both a television license and a form of council tax called “Taxe d’habitation”.
TV License (redevance audiovisuelle)
As in the UK, if you own a television you have to pay a TV license, regardless of your intention. Currently the cost of a TV license in France is €133. It is assumed that each household has a TV in their household and therefore if you do not own one you need to declare as such on your tax return.
Taxe d’habitation is a form of council tax which is based on the average rental cost of houses local to you multiplied by a percentage set by your commune. The taxe d’habitation is owed on every property in France regardless of whether it is a primary residence or not and is owed by the occupier as at 1st January of that year.
Non-compulsory taxes for expats in France
In addition to the compulsory taxes, you may also be liable for a number of other taxes in France including capital gains tax, wealth tax and a property tax called taxe foncière.
Taxe foncière is a tax which is owed by property owners, regardless of whether they live in the property or not. As with the taxe d’habitation, the amount of tax owed is calculated by multiplying the average rental cost in your area with a percentage set by the commune.
French inheritance tax
French inheritance tax is known locally as droits de succession and is significantly affected by the status of both the person who has died and the beneficiaries.
The primary factor to consider is the tax residency status of the people involved.
If the deceased is deemed to be a tax resident in France (i.e. their primary residence, primary place of work, France is a focus for their primary investments, or has spent more than 183 days a year in France), the entire worldwide estate of the deceased could be exposed to inheritance tax.
If the deceased is deemed to be a non-resident, only property in France will be subject to inheritance tax – regardless of where the beneficiaries live.
This rule is due, in part, to various tax treaties which have been signed between France and other countries – including the UK – which exclude other assets to be exempt from French inheritance tax.
In the likely situation that you are still a UK domicile, your worldwide assets are subject to UK inheritance tax, regardless of your tax residence situation in France. You may also still be liable to French inheritance tax, however, due to the tax treaty in place, if handled correctly, tax should inheritance tax should not be applied twice to the same assets.
It is important that you seek advice from an expert in both French and UK tax if you have any concerns around your exposure to inheritance tax.
French tax for expats and assurance vie
Assurance vie provide it’s holders with a tax-free wrapper for their investments.
If the holder of the assurance vie dies, the assets held within are distributed to the beneficiaries (net of social taxes), although may be subject to French inheritance tax laws, unless the following apply:
- The beneficiary is the spouse or partner of the deceased
- Each beneficiary can receive up to €152,000 tax-free from assurance vie
For a full explanation of assurance vie, please read our article which explains everything an expat needs to know about assurance vie.
As with the UK, French tax rules regularly change and with the emphasis on the individual to file their own tax return, it is easy to make a costly mistake.
Therefore it is advisable to seek regular advice if you are unsure about any changes which may have been made to the French tax system.
At this time we cannot offer French tax consultations.