5. Calculating Your French Income Tax Liability
- Rates/Bands 2023
- Exemption Thresholds 2023
- Income Tax Payable 2023
- Social Charges
- Exceptionally High Income
5.2.1. Rates/Bands 2023 (2022 Income)
There are five tax rates and bands on net income earned in 2022 (taxable in 2023), as follows:
|Income Share||Tax Rate|
|Up to €10,777||0%|
|Between €10,777 - €27,478||11%|
|Between €27,479 - €78,570||30%|
|Between €78,571 - €168,994||41%|
The thresholds increased by 5.4% in 2023 for 2022 income.
Income tax 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 couple with two children with a net taxable annual income in 2021 of €55,950. The income is then divided into three parts being €18,650 (€55,950/3) each, with the first €10,777 of each part at 0% tax rate. The balance of each part is taxed at the rate of 11% and the sum for each part multiplied by 3.
There are various adjustments made to your tax liability that are applied automatically by the tax authority.
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 €1,678 for a half-part (child) (2023 for 2022 income).
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.
For 2023 (2022 income) if you are nominally liable to pay tax of less than €1,840 (single person) or €3.005 (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. In 2023 (for 2022 income) it is the difference between €833 (for a single person) or €1,378 (for a couple) and 45.25% of your gross income.
By way of example for income earned in 2022, in the case of a couple with a tax liability of €1,500 the décote fiscal is €1,378 - (0.4525 x €1,500) = €1,378 - 678 = €700. The final tax liability is therefore €1,500 - €700 = €800.
Where smaller amounts of tax are due the discount will completely remove any liability.
iii. Under €61 Liability - If the tax due is no greater than €61 it is not charged.
iv. 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.
v. 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 2023 (2022 Income)
In practice, only 44% 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%. So 56% of inhabitants pay no income tax.
The following table shows the maximum net taxable income below which a couple living on their own, and with a varying number of dependents in the household, would not be taxed.
NB: It applies to income taxed solely on the basis of the income tax bands and rates, and not on the basis of a flat-rate, eg non-residents, investment income and those who run a micro-entreprise who have opted for the flat-rate tax micro-fiscal.
As can be seen, a couple with no dependants would not pay any income tax in 2023 if their net taxable income in 2022 was no greater than €30,558. The table also shows their nil imposition threshold with dependents in the household.
|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 €16,372. The table also shows their nil imposition threshold with dependants in the household.
|Number of Parts||Nil Imposition|
5.2.3. Income Tax Payable 2023 (2022 Income)
You can use the following formula to calculate the (approximate) amount of tax payable in 2023 on 2022 income, before the impact of the décote fiscal and the quodient familial and any tax credits to which you may be entitled.
It is only suitable if you are resident.
Once again, the formula has been provided by the French tax authority.
|Up to €10,777||0 %|
|€10,777 to €26,478||11%||(I X 0.11) - (1,185.47 x N)|
|€26,478 to €75,570||30%||(I X 0.30) - (6,406.29 x N)|
|€75,570 to €168,994||41%||(I X 0.41) - (15,048.99 x N)|
|€168,994+||45%||(I X 0.45) - (21,808.75 x N)|
- I = Net taxable income
- N = Number of parts in the household
Thus, a couple with net taxable income of €85,000 being two household 'parts'. The total income is divided by 2, so €85,000/2 = €42,500 and therefore within the 30% tax band on marginal income. The formula is then (€85,000 x 0.3) - (€6,406.29 x 2) = €12,687 tax payable.
The result will before application of the ceiling under the quotient familial, and any credits or reductions in tax to which you may be entitled.
Alternatively, if you find the maths is tricky, with figures provided by the French tax authority you can read how much tax you pay in 2023 at various points on the income scale, in a piece we published in France Insider at French Income Tax Payable in 2023. The figures are for single persons and married couples at income levels up to €100,000 a year.
If you seek advice or assistance with the completion of your income tax return you can contact our English language speaking tax partners Cabinet Budiz who offer tax and accounting services at competitive rates.
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 your revenu fiscal de référence and not taxable income (revenu imposable)
Non-residents are subject to a flat rate of 20% or 30% on rental/investment income, 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 €27,478 the rate remains taxed at 20%. Rental and related investment income from France, and taxable in France, beyond this level is taxed at 30% (2023 on 2022 income).
As a result of simultaneous changes to the liability for social charges, since 2019 the combined rate of social charges and income tax on French sourced income of EEA non-residents is 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 increased 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, alongside your tax declaration, you need to submit Form 2041TM 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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