5. Calculating Your French Income Tax Liability
5.2.1. Income Tax Rates/Bands 2018
For those who are resident in France there are five tax rates and bands on net taxable income earned in 2017, as follows:
|Income Share||Tax Rate|
|Up to €9,807||0%|
|Between €9,807 - €27,086||14%|
|Between €27,086 - €72,617||30%|
|Between €72,617 - €153,783||41%|
The figures in each tax band will be increased by 1.6% for 2019 (2018 income), although the rates for each band will remain the same. We will publish full details in due course.
However, as a general rule, income earned in 2018 will be exempt from 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.
The rates are applied on a sliced basis so that each household 'part’ of the income is charged on a progressive basis, 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 €9,807 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 €15,193 (€25,000 - €9,807), which gives an actual rate on total taxable income of around 8.5%.
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 €1,527 (2018 for 2017 income) for each part. So for two children the maximum reduction is €3,054.
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 2018 (for income earned in 2017) if you are nominally liable to pay tax of less than €1,569 (single person) or €2,585 (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 €1,140, the discount that is applied is €1,939 - €855 (€1,140x75%) = €1,084. Their tax liability is €1,140 - €1,084 = €56.
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 €37,370 for a couple. 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 €20,705 (single person) and €41,410 (couple), with higher thresholds if you have dependants. The reduction is applied after deduction of the décote fiscal.
iv. Under €61 Liability - If the tax due is no greater than €61 (2018), 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 2018 if their net taxable income in 2017 was no greater than €27,838.
|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 €14,917. The table also shows their nil imposition threshold with dependants in the household.
|Number of Parts||Nil Imposition|
5.2.3. Income Tax Payable 2018
You can use the following formulae to calculate the (approximate) amount of tax you will pay in 2018. 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 €9 807 €||0 %|
|€9,807 to €27,086||14%||(I X 0.14) - (1,372.98 x N)|
|€27,086 to €72,617||30%||(I X 0.30) - (5,706.74 x N)|
|€72,617 to €153,783||41%||(I X 0.41) - (13,694.61 x N)|
|€153,783+||45%||(I X 0.45) - (19,845.93 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%) - €1,372.98 X 3) = €2,881.
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.
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% on net taxable income, except in the case of savings and investment income, when the Prélèvement Forfaitaire Unique (PFU) applies.
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.
In addition, if you are liable to no more than €305 in income tax, it is not imposed.
5.2.7. Income Tax in 2019
In 2019 the French governement is introducing PAYE.
This will mean that most 2018 income will be exempt from tax in 2019.
Information on the change is set out in an article we published in our Newsletter at Taxation of Income in France 2019.
Next: French Tax Allowances
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