Most 2018 income will escape taxation this year, but if you remain liable on an 'exceptional' basis how much might you expect to have to pay?
In two months' time anyone who is resident in France will be required to make their annual tax return. Non-residents with French sourced income also need to make a tax declaration in France on that income.
However, due to the introduction of deduction at source in 2019 (prélèvement à la source) very few households will pay any income tax on their 2018 income.
This year, the normal one-year time lag between income collection and tax payment has been eliminated due to the deduction at source.
In practice, of course, for many expatriates the payment of income tax remains on 'an account' basis, due to the absence of an employer or French pension administrator to deduct the tax. The deduction at source, therefore, refers primarily to salaried income.
Investment income, such as savings and dividends, will be taxed at source, as is in 2018, through the prélèvement forfaitaire unique – PFU, although it is possible to opt out of being taxed on this basis.
To avoid double taxation in 2019, the tax due on income in 2018 will be erased by means of an exceptional tax credit, called the crédit d’impôt modernisation du recouvrement (CIMR). This credit does not apply to investment income.
The CIMR will be automatically calculated by the tax authority on the basis of the income tax return. The amount of the CIMR is equal to the amount of tax theoretically due on 2018 income.
However, what the government has termed 'exceptional' income will be excluded from the tax credit, which means that if your income in 2018 was materially in excess of 2017 (or the average of three years) you will need to pay income tax on the exceptional part of this income.
Such income includes termination and severance payments, profit-sharing payments, but also lump-sums paid on retirement.
Accordingly, for those who may be liable, and for the more general interest of readers, we set out below the amount of impôt sur le revenu payable in 2019 on such exceptional income for 2018, for those who are tax resident in France.
The amounts payable are similar that which was due in 2018 on 2017 income, adjusted for inflation; other things being equal it will be much the same in 2019 on this year's income. The figures are those supplied by the tax authority in France.
The tables do not show the level of social charges (prélèvements sociaux) to which you will be liable, although, once again, most households will be exempt from the social charges on 2018 due to the CIMR.
You can find more information about the rules concerning pension income (rates, reductions and exemptions) that apply on pension income here.
The social charges will appear on your income tax notice.
The table below shows that for a single person no income tax is payable if your net taxable (exceptional) income was below circa €15,000.
This threshold is increased if you have dependants in the household; a single person with one child would pay no income if their income was below circa €20,000, and for two children it would be circa €24,000.
The table is for a single person without dependants in the household.
|Up to €14,846||€0|
The second table shows that for a married couple, or those in a civil partnership, with no dependants there is complete exemption from income tax with a net taxable (exceptional) income below circa €28,000.
The threshold is increased if there are dependant children in the household, to circa €32,000 for one child and to circa €37,000 for two children.
The table is for a couple without dependants.
|Up to €28,000||€0 |