5. Calculating Your Income Tax Liability in France
- 5.1 Composition of Your French Household
- 5.2 French Income Tax Rates
- 5.3 French Tax Allowances
In determining your tax liability the tax authority will first establish your gross earnings, your revenu brut global.
They will then make certain allowances against this income to arrive at your net earnings, your revenu net global.
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 French Household
In order to minimise the impact of higher rates of taxation on those with dependants, the size of the household is taken into account in determining the total amount of income tax which should be payable.
This is called the quodient familial.
The method used is to divide the household into ‘parts’ corresponding to the size 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.
So, 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 and different circumstances of families.
Broadly speaking, however, each adult counts as one share and each child a half share, although the third and any subsequent children or dependants count as one 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 household and those where there are handicapped children or adults in the household.
Unmarried couples in a civil partnership (called PACS) are treated the same as married couples.
In order to ensure that those with large incomes do not benefit over generously from this system the amount of tax savings for dependants is also limited to a maximum sum where the income of the household exceeds certain limits, although these limits are fairly generous and should not be relevant to most expats.
5.2. French Income Tax Rates
The tax scale for the tax year 2008 (for income earned in 2007) applicable to each ‘part’ in a household is set out below.
The rates are applied on a sliced basis so that each ‘part’ of the income is charged on a progressive basis.
There are five tax bands, as follows:
Table: French Tax Bands - 2008
| Up to €5,687 | 0% |
| Between €5,688 & €11,344 | 5.5% |
| Between €11,345 & €25,195 | 14% |
| Between €25,196 & €67,546 | 30% |
| Above €67,546 | 40% |
On the basis of these rates we show below an approximate guide to the net income you would need to earn in 2008, by household size, before you would be liable to pay income tax.
Table: Income Thresholds in France - 2008
| Single Adult | €11,404 |
| Single Adult + Child | €14,340 |
| Two Adults | €17,184 |
| Two Adults + Child | €20,027 |
| Two Adults + Two Children | €22,871 |
The position is more generous for those reaching 65 years, and those suffering a major disability (irrespective of age), which you can see more about in our section on tax allowances.
If your net income (as determined by the tax authority) was higher than any of the threshold figures in the table, but you were entitled to an income tax credit (say, for energy conservation works), then the value of the credit would be set against the amount of tax for which you were liable.
If you are liable to less than €61 in income tax, then no tax charge is made, and below a tax charge of €838, a rebate is payable to you, on a formula basis, that would lower the amount you would actually be required to pay! We have taken into account these concessions in the calculation of the above table.
At the top end, the government have also introduced a ‘cap’ on the amount of taxation that you should be obliged to pay.
This cap is called the bouclier fiscal and is set at 50% of net income for total taxes from income tax, wealth tax, the social welfare levies (CSG/CRDS) and local taxes.
It is unlikely you would benefit from this cap unless you were liable to income tax at the highest rate, and also paid wealth tax.
If you are in the fortunate position of being eligible for recovery of overpaid taxes, you are probably going to need an accountant to take you through the whole process, as the calculation is not an easy one to make!
Next: French Tax Allowances
Finance & Taxation