5. Calculating Your French Income Tax Liability
- Rates/Bands 2019
- Exemption Thresholds 2019
- Income Tax Payable 2019
- Social Charges
- Exceptionally High Income
As a general rule, 2018 income will be exempt from income tax, due to the introduction of 'deduction at source' in 2019. You can read more about prélèvement à la source, as it is called, at Taxation of Income in 2019.
5.2.1. Rates/Bands 2019
For those who are resident in France there are five tax rates and bands on net taxable income earned in 2018 (taxable in 2019), as follows:
|Income Share||Tax Rate|
|Up to €9,964||0%|
|Between €9,964 - €27,519||14%|
|Between €27,519 - €73,779||30%|
|Between €73,779 - €156,224||41%|
The rates are applied on a fractional basis so that each household 'part’ of the income is charged progressively, as we outlined in the previous section. Thus, if a couple have net income of €30,000 in the year there are two 'parts' of €15,000, with each part taxed using the scale rates.
Example: Assume a household of two adults on a joint net taxable income of €30,000. In the first place their income is divided into two parts of €15,000. Each part is then taxed on a fractional basis using the tax bands. The first €9,964 of each part is zero rated, and the remainder for each part then charged at 14%. The tax payable by each is then multiplied by two to give the total tax payable.
Only if you were a single person household would you be charged as one 'part' on your income. Thus, a single person with taxable income of €25,000 would be charged at the rate of 14% on €15,036 (€25,000 - €9,964), which gives an actual rate on total taxable income of around 8%.
There are then various adjustments made to your tax liability.
i. Quotient Familial - As we stated in the previous page, there is a cap on the tax benefit that is granted for dependants arising out of the division of the household into 'parts'.
The level of ceiling depends on the size and composition of the household, but as a general rule it is €1,551 (2019 for 2018 income) for each part. So for two children the maximum reduction is €3,102.
ii. Discount - A discount mechanism (décote fiscal) operates for those who pay little by way of income tax. This discount operates to ease in the imposition of income tax on a household that becomes liable.
So for 2019 (2018 income) if you are nominally liable to pay tax of less than €1,594 (single person) or €2,626 (couple), a reduction in income tax is granted to you on a formula basis that lowers the actual amount you would be required to pay.
The formula for the reduction is characteristically complex, being the difference between 75% of the tax limit threshold above, and 75% of your notional tax charge. The reduction normally works out at a few hundred euros.
By way of example, in the case of a married couple whose tax liability before the discount is €1,000 are entitled to a discount as their tax due is below €2,626. The calculation is then €2,626 x 75% - €1,000 75% = €1,219, meaning their tax liability is zero.
In the case of a single person whose tax liability before the discount is €1,000, the calculation is €1,594 x 75% - €1,000 x 75% = €445 leaving a tax charge of €555 (€1,000 x €445).
iii. Reduction - A further reduction of 20% in tax liability applies where your net taxable income is no greater than €18,685 for single person (one part) and €37,970 for a couple (2019 for 2018 income). The levels are increased by €3,737 for each half-part, so the threshold for a couple with two children is €44,844. The reduction also applies on a digressive basis for income up to €21,037 (single person) and €42,073 (couple), with higher thresholds if you have dependants. The reduction is applied after deduction of the décote fiscal.
iv. Under €75 Liability - If the tax due is no greater than €75 (2019 for 2018 income), it is not charged.
v. Flat Tax - Savings and investment income (dividends and certain other financial instruments) are subject to separate taxation through a 'flat-tax', called the Prélèvement Forfaitaire Unique (PFU), although it is possible to opt out of this tax. You can read more at Taxation of Savings and Investment Income.
vi. Tax Credits - If you are entitled to any tax credits (such as home insulation) these will be deducted from your liability.
5.2.2. Exemption Thresholds
In practice, less than 50% of inhabitants in France pay any income tax at all; only around 14% pay at the rate of 30%, and less than 1% pay at the rate of 45%.
The following tables have been provided by the French tax authority.
The first table shows the maximum net taxable income below which a couple living on their own, and with a varying number of dependants in the household, would not be taxed.
As can be seen, a couple with no dependants would not pay any income tax in 2019 if their net taxable income in 2018 was no greater than €27,974.
However, due to the exemption that applies in 2018, these figures only apply to 'exceptional' income.
|Number of Parts||Nil Imposition|
The table below shows the same analysis for a single person, who would pay no income tax living on their own with an income no greater than €14,846. The table also shows their nil imposition threshold with dependants in the household.
|Number of Parts||Nil Imposition|
5.2.3. Income Tax Payable 2019
You can use the following formulae to calculate the (approximate) amount of tax you will pay in 2019 on 2018, but note that most income will be exempt, as we have stated above.
It is only suitable if you are resident.
Once again, the formulae and subsequent tables have been provided by the French tax authority.
|Up to €9,964 €||0 %|
|€9,964 to €27,519||14%||(I X 0.14) - (1,394.96 x N)|
|€27,520 to €73,779||30%||(I X 0.30) - (5,798 x N)|
|€73,780 to €156,244||41%||(I X 0.41) - (13,913.69 x N)|
|€156,245+||45%||(I X 0.45) - (20,163.45 x N)|
- I = Net taxable income
- N = Number of parts in the household
Thus, a household with net taxable income of €50,000 and three household 'parts'. The total income is divided by 3, being €50,000/3 = €16,666. This amount is in the 14% band of taxation, so the calculation is (€50,000 X 0.14%) - €1,394.96 X 3) = €2,084. (2019 for 2018 income)
The result will before application of the ceiling under the quodient familial, and any credits or reductions in tax to which you may be entitled.
If you are having difficulty with the maths, the following table gives the tax payable by a single person with no dependants, for net taxable income up to €50,000 (2019 for 2018 income). Once again, only 'exceptional' income is taxed.
The following table shows the tax payable by a couple with no dependants, for net taxable income up to €65,000.
5.2.4. Social Charges
As well as your liability to income tax you also need to consider your liability to French income tax by another name, that of the social charges, which you can read about at Social Charges.
5.2.5. Contribution Exceptionnelle sur les Hauts Revenus
In addition to the basic rates of income tax those fortunate few with a taxable income of upwards of €250,000 pa are liable for a special tax called contribution exceptionnelle sur les hauts revenus.
This tax is at the rate of 3% on income up to €500,000, and at the rate of 4% on income above €500,000.
Married couples and those in a civil partnership are exempt up to €500,000, when they then become liable at the rate of 3% to €1m, and 4% above this figure.
The tax is imposed on net income, after determination of the tax liability under the standard scale rates.
Non-residents are subject to a flat rate of 20% or 30% (2019 on 2018 income) on France based net taxable income.
The 30% rate is an increase of 10 percentage points on the previous year and arises from the 2018 Finance Act, which came about as a result of a reduction in social charges for non-residents from the EEA.
In terms of application of the two rates, for income up to €27,519 the rate remains taxed at 20%. Rental and related investment income from France beyond this level is taxed at 30%.
As a result of simultaneous changes to the liability for social charges, effective from 2019 on 2018 income, the combined rate of social charges and income tax on French sourced income of EEA non-residents will fall to 27.5% (down from 37.2%), provided the income does not exceed the above threshold.
There is no reduction in social charges for non-EEA residents, which remains at 17.2%. So for them the combined rate of social charges and income tax will increase from 37.2% to 47.2%, depending on income threshold, as above.
You can read more about these changes in our Newsletter article Reform of Social Charges.
Despite these rates if you are able to justify a lower rate based on your worldwide income, you need to indicate this option on the tax return and include your tax return and tax notice from your home country. If these are not available at the time you need to submit a letter sur l'honneur, pending receipt of the relevant paperwork.
The law also provides that, for the purpose of determining the average tax rate on worldwide income received since 1 January 2018, maintenance payments made by the taxpayer are deductible when they are made to a beneficiary in France (children, parents), and provided their inclusion is not likely to reduce the tax payable by the taxpayer in their country of residence. These payments are known as a pension alimentaire.
Finally, if you are liable to no more than €305 in income tax, it is not imposed.
Next: French Tax Allowances
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