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French Taxation

French Income Tax Rates for 2014

Tuesday 08 October 2013

Income tax bands get an inflationary increase next year, after two years when they have been frozen.

The French government last month introduced its proposed budget for 2014, in which they set out the income tax bands and rates for next year (for income earned in 2013).

In contrast to the previous two years there will be an increase in the income thresholds for each tax band, albeit of only 0.8%.

The new tax bands, with their unchanged tax rates, are as follows:

Tax Band
Rate
Up to €6,011 0 %
€6,012 to €11,9915,5 %
€11,992 to €26,63114 %
€26,632 to €71,39730 %
€71,398 to €151,20041 %
From €151,20045 %

These tax bands are applied on a proportional basis to the number of persons in the household. So for a couple the number of household 'parts' (or shares) would be 2. Assuming a net income of €30,000, then the value of each part is €15,000. The income tax payable on €15,000 would then be assessed, and the resultant figure multiplied by 2.

In addition to an increase in the tax thresholds, there will also be an increase of 5% in the discount mechanism that operates for those who pay little by way of income tax. The discount figures rises from €480 to €508. Under this mechanism if you were liable to pay less than circa €1,000 in income tax you would obtain relief on the actual amount you paid.

Given the general discounts and allowances used to calculated tax payable, an early retired couple under 65, or those on a salary, would need to have an income of around €20,000 a year before they paid any income tax at all, and for a couple at least 65 years of age (or where one is at least this age) it rises to over €23,000. The levels are between €1,000 to €3,000 higher for those whose income comes from business profits.

High Earners

In addition to impôt sur le revenu there will be two additional taxes for high rollers, the first of which was introduced last year.

The first tax is called the contribution exceptionnelle sur les hauts revenus.

The rate of the tax is 3% on income between €250,001 and €500,000, while those with an income above €500,000 pay at the rate of 4% on any income above the threshold.

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.

In addition, there will be a tax charge of 50% on earnings above €1 million, called the taxe exceptionnelle de solidarité sur les hauts salaires.

At this stage we do not fully understand the relationship between these two taxes, but we think it likely few of our readers will be affected by them!

Social Charges

No changes are proposed in the social charges, whose varying rates remain the same for different types of income. On investment income the rate remains at 15.5%, whilst for pension income it remains at 7.1% (or 4.1%, provided you pay less than €61 in income tax).

Quodient Familial

In addition to these changes the government has reduced the tax advantage that can be gained under the system of quotient familial, from €2,000 to €1,500 a year for each half 'part' of the household, a change that only affects those with fairly substantial incomes.

School Costs

The tax reduction for school costs is also to be abolished. The sums involved are minor, equivalent to €61 for a child at primary school. This does not affect entitlement to school grants and other benefits.


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