4. Your French Income Tax Return
- 4.1. Tax Return is Obligatory
4.2. Tax Calendar
4.3. Completing Your French Tax Return
4.3. Completing Your French Income Tax Return
4.3.1. Tax Forms
Not surprisingly the paperwork associated with the submission of a tax return in France is rather complicated.
In practice, most people only need to fill out a handful of the boxes on the forms, but there are numerous boxes and different forms to use for different types of income. Trying to establish which ones to complete can be a nightmare!
There is no single tax return in the same way as is the case in the UK.
There are various supplementary forms for different types of income. The information on these supplementary forms needs to be consolidated on the main 'F2042' form.
The main forms for personal income tax are:
- Form 2042 - Main form
- Form 2042CK - 'Complementary' income
- Form 2031 - Furnished property rental income (Régime réel)
- Form 2044 - Non-Furnished property rental income (Régime réel)
- Form 2047 - Income from abroad
- Form 3916 - Declaration Accounts held abroad
Capital gains on the sale of real estate are declared at the time of sale in the notaires office, although you also need to report the gain on your income tax return, as well as capital gains on shares and other property, on Form 2074.
Some steps are being made to make the process easier, notably by the introduction of a simplified form for those whose who have a single source of income, e.g. salary or pension.
In addition, the authorities send out pre-completed returns (called déclarations préremplies) to the majority of taxpayers resident in France!
Although it sounds rather scary the information on the forms is derived from the routine data supplied by your French employer or other French state body, e.g. pensions authority, unemployment agency.
Clearly, these forms will not apply to most retired expats, who are only likely to be be in receipt of pension and other earnings from their home country. Neither do they apply to those who run a business. However, if you are salaried in France, or you are in receipt of French social security benefits, then it will be relevant to you.
If you have not completed a French tax return you would be well advised to seek assistance from an accountant first time around, particularly if you have a diverse range of earnings.
If your income is modest, or circumstances straightforward, (and you can speak a little French) a cheaper alternative would be for you to visit your local tax office (Centre d’impôts
) and ask them for their assistance to help you fill out the forms.
If you have a good relationship with your local French bank then you may well find that they will also be prepared to assist you in the completion of your tax return and probably without having to pay a fee.
Do, however, be a little careful, as even local tax officials do not always understand the rules, in particular those relating to exempt pension income (see below).
Ensure the duplicate returns you will have received are also filled for your own records, which you can then use to complete your tax return yourself the following year!
In all cases prepare a statement of earnings before you go, and have available with you supporting documentation.
It is important to distinguish the origin of your earnings as different types of earnings are taxed on a different basis, e.g. salary, pension, rent, shares, capital gains, interest.
If you are in receipt of a government service pension that is taxed in the UK you will need to declare it on Form 2047 as revenus exonérés, information which should also be copied onto the main Form 2042.
If you are exempt from the payment of health contributions into the French health system because you have an 'E/S' form (notably S1), then you would be wise to ensure this information is stated on the Form 2047 (or accompanying letter) as you will then not be liable for the social charges CSG/CRDS on your pension. The 'E/S' form status of expats is often not picked up by the local French tax offices, resulting in overpayment of these charges.
If you have an interest earning French bank account then you are required to submit with your tax declaration the annual notice of interest earned that all French banks are required to supply their customers at the beginning of each year. The notice is called imprimé fiscal unique (IFU). This process is increasingly being automated, so you may well find that your tax return is received with the relevant amounts already inserted on the return.
In relation to earnings or income from abroad you will need to convert the sums into their euro equivalent, using either the official exchange rate as advised by the tax authority, or the rate of exchange at the time the you received the income. In the case of the latter the currency exchange note you receive from your bank or broker should be used. Interest earned should be declared gross, and if you have already paid income tax on it in the UK, then you need to reclaim it from HM Revenues.
If you earn rental income from the UK then it will be taxed in the UK, but you need to declare it on your French tax return (F2047) for which you will be granted a tax credit, equivalent to the tax payable in France.
If you have bank accounts abroad you are also formally obliged to declare the details (although not the amounts) of these bank accounts, although they only need be declared once. There are substantial fines against those holding an undeclared offshore bank account in a tax haven. While you may think you can keep such an account from the prying eyes of the French tax authorities the level of cooperation between tax authorities across the world is increasing at a fast pace.
If you obtained capital gains on property in the year, although you will have already paid tax on the gain at the time of the sale, this income must also be recorded on the income tax return. This will not affect your net taxable income for the year. Other capital gains must also be recorded, eg shares.
You are also obliged to declare life insurance policies held abroad.
It is unlikely you would be fined for not formally declaring a bank account, provided you declare income received on the accounts.
If you are seeking an income tax relief for eligible works carried out to your property, then you will need to enclose the invoice(s).
4.3.3. Change of Family Circumstances
If you got married, or entered a French civil partnership, in the year you have the choice of submitting either a single joint tax declaration, or two declarations, one for each of you.
If you separated, divorced or ended a civil partnership in the year, then you each need to complete your own tax declaration in relation to your own income.
If your spouse or civil partner dies in the year, then you have two tax declarations to complete, but your tax liability will normally be assessed on the basis of your circumstances on 1st January in the year, so that you benefit from the higher allowance for a couple.
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Next: Calculating Your Income Tax Liability
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