5. Calculating Your French Income Tax Liability
- 5.1. Composition of Your Household
- 5.2. French Income Tax Rates
- 5.3. French Income Tax Allowances
- 5.4. French Tax Credits
In determining your tax liability the French tax authority will first establish your total earnings, called your revenu brut global. This figure is achieved after deduction of allowances.
They will then make certain adjustments at your net taxable earnings, called your revenu imposable.
Your tax liability will then be calculated on a progressive basis, having regard to the composition of your household and the allowances to which you may be entitled.
5.1. Composition of Your Household
In order to minimise the impact of higher rates of taxation on those with dependants, the size and circumstances of the household is taken into account in determining the total amount of income tax which should be payable.
This is called the quotient familial.
The method used is to divide the household into ‘parts’ (or 'shares') corresponding to the size and circumstances of the household.
The total income of the household is then divided by the number of members in it.
A notional tax charge is created for a single ‘part’ on a progressive basis using the income tax bands.
The resulting figure is then multiplied by the number of ‘parts’ to give the tax liability for the household.
Thus, for a couple the number of household parts would be 2. Assuming a net income of €30,000, then the value of each part would be €15,000. The income tax payable on €15,000 would then be assessed, and the resultant figure multiplied by 2.
On this basis a single person would start paying at higher rates of tax than a three person household on the same income because, in the latter case, tax is calculated on the partial share of the income of each member of the household.
As might be expected there is a complicated set of rules for calculating the number in each household to take account of the varied circumstances of families.
Broadly speaking, however, each adult counts as one part/share and each child a half part/share, although the third and any subsequent children or dependants count as one part/share.
Thus, in a household with two adults, the household income would be divided by two, whereas in a household with two parents and two children the household income would be divided by three.
The rules are slightly more generous for single parent households and those where there are disabled dependants or adults in the household.
Unmarried couples in a civil partnership are treated the same as married couples.
The following table summaries the position for most households.
Key: A = Married/Civil Partnership; B = Widowed Person; C = Single/Divorced
Source: Code général des impôts / 2012
Disabled persons, or those with disabled dependents, are granted an additional half (.5) share in each case.
Single persons, divorcees, separated and widowed persons who are living alone who brought up alone at least one child for at least five years are granted an additional half (.5) share. This means the income of such persons is divided by 1.5.
Where a single or divorced person with one or more dependents is living in 'free union' with another person (célibataire ou divorcé vivant en concubinage
) the number of parts for each dependent is reduce by .5.
Where a divorced couple have joint custody of any children then the rate of the part for each parent is reduced to .25 for each child.
In order to ensure that those with large incomes do not benefit over generously from this system the amount of tax allowance for dependents is also limited to a maximum sum, although it is generous and should not be relevant to most expats. For 2013 income the maximum allowance under the quotient familial
(which reduces your tax liability the larger the household) is €1,500 for each dependant.
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