5. Calculating Your Income Tax Liability in France

1. 5.1. Composition of Your French Household
   5.2. French Income Tax Rates
   5.3. French Tax Allowances

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5.3. French Tax Allowances

There are a number of tax allowances you may be able to use to reduce your liability to income tax.

An allowance may take the form of either, tax relief (réduction d’impôt), or a tax credit (crédit d’impôt), if any of the circumstances set out below apply.

1. 5.3.1. Tax Reliefs in France
2. 5.3.2. Tax Credits in France

5.3.1. Tax Reliefs in France

The main tax reliefs available are as follows:

1. i. Salaries and Pensions
2. ii. Child's Education
3. iii. Domestic Help
4. iv. Nursing/Residential Care
5. v. Ailimony Payments
6. vi. Charitable Donations
7. vii. Investments in France

i. Salaries and Pensions

There is a general abatement of 10% for professional costs in relation to salaries up to a ceiling salary figure of €13,501.

Salaried employees can elect to deduct actual professional costs, within limits, including costs of travel to work, meals, tools and clothing. Social security contributions are also deductible.

If your pension is taxed in France, then there is also a general 10% abatement, to a maximum sum of €3446 per fiscal household.

In addition, for those aged over 65 years, a fixed sum is deducted from their income before they become liable to income tax.

With total net income of less than €13,550 the deduction is €2202 per person; between €13,50 and €21,860 the deduction is €1101 person.

These same reductions also apply to someone who suffers from a high level of disability, irrespective of age.

ii. Child’s Education

A reduction in income tax towards the costs of a child’s education, called les frais de scolarité .

The reduction is €61 for a child at collège, €153 for a child at lycée and €183 for child at university.

iii. Domestic Help

An allowance of 50%, against the costs of employing someone to assist with domestic duties at your home, called l’emploi d’un salarie a domicile.

The allowance is only available to couples who work full-time, and who are, therefore, unable to look after their child during the day.

The concession operates through a system of payment called Chèque emploi service universel .

The duties can include cleaning, gardening, driving, child care, health care, cooking etc.

An ‘au pair’ is not eligible and there are other exclusions and limitations

There is a basic cost ceiling of €12,000, giving a maximum allowance is €6000.

This cost ceiling is increased up to €15,000 where you are over 65 years old or you have a dependant child, and to €20,000 in the case of those who have a serious incapacity.

iv. Long Term Nursing/Residential Care

The costs of those receiving long term nursing or residential care are eligible for a tax allowance of 25% against maximum eligible costs of €10,000 ie €2500.

v. Alimony Payments

Payments to a former spouse, in cash or kind, within the first twelve months of the divorce settlement open access to an allowance of 25%, against a maximum eligible payment of €30,500.

vi. Charitable Donations

An allowance of 75% up to a maximum of €479.

Larger donations can be rolled over into later years.

vii. Investments in France

There are a variety of tax concessions for those prepared to invest in innovative companies, woodland, tourism properties, special property letting schemes and in dependant colonies. You will need to discuss with your financial advisors.

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5.3.2. Tax Credits in France

1. i. Home Energy Conservation
2. ii. Home Adaptations
3. iii. Energy Efficient Vehicles
4. iv. Child Care
5. v. Rainwater Recuperation

i. Home Energy Conservation

An allowance ranging from 15% to 50% for the installation of certain energy conservation work in the family home. It may be an existing property, or one to be constructed.

The allowance is called crédit d’impôt development durable.

The property must be your principal home, and is only available against the equipment and materials, not the costs of labour.

Similarly, it is only available if the work is carried out by a professional tradesman, so DIY schemes are not eligible.

The measures include low temperature boilers (15%) condensing boilers (25%), insulation and double glazing (25%), rainwater harvesting systems (25%), heat pumps (50%), solar energy (50%), and wood burning stoves (50%).

The maximum eligible costs are €8000 per person, or €16,000 for a couple.

ii. Home Adaptations

An allowance of between 15% and 25% against the cost of specific works to give greater mobility or safety to elderly or disabled persons in the home.

The allowance is called crédit d’impôt l’aide à la personnel.

As with home energy conservation works, labour costs are not eligible. The maximum eligible costs are €5000 for a single person, which is doubled for a couple.

iii. Energy Efficient Vehicles

An allowance of €2000 against the purchase costs of a non-polluting vehicle or conversion of an existing vehicle under three years old, called l’achat d’un véhicule non polluant.

There are tough environmental tests (vehicle must push out less than 160 g/km of CO2, reducing to 140 g/km in 2008) and few new cars currently meet the criteria!

iv. Child Care

An allowance of 50% up to a maximum of €2300 per child under 7 years of age towards the costs of child care outside of the home, called les frais de garde d’enfants.

Only those costs actually incurred by you are eligible, so if you receive assistance from your employer, or the social security system, the allowance is only available on costs net of this assistance.

No allowance is payable where the child is attending a maternity school.

v. Rainwater Recuperation

A tax credit of 25% against the cost of installation of a rainwater recuperation system from a roof of the principal home.

To be eligible the equipment must be supplied and installed by a registered tradesman.

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