With the French income tax declaration deadline approaching we take you through the basic rules concerning income tax in France.
If you are resident in France, you are liable to French income tax on the basis of your worldwide income.
Second home owners who earn rental income in France are liable to French income tax and thereby obliged to complete a French income tax return. The French government have changed the basis on which such income is now taxed.
Residents need to declare the income of everyone in your household, although there are particular rules concerning children over 18 years of age and unmarried couples.
Even though you may be taxed on some of your income in the UK or elsewhere, if you are resident in France you need to declare all of your worldwide income on your French tax return. This is done to establish the rate you will pay on any income earned in France.
Those with pensions from the UK are taxed in France, although 'government service pensions' are always taxed in the UK, but need to be declared on the French tax return.
This year, paper based return needs to be submitted by 17th May, for both residents and non-residents.
However, you are required to submit on-line in 2017 if your net taxable income (revenu fiscal de référence) in 2015 was greater than €28,000.
If you submit on-line you are given some additional time, with the precise date depending on the where you live.
The dates for on-line returns are as follows:
- Departments 01 to 19 (zone 1) - 23rd May
- Departments 20 to 49 (zone 2) - 30th May
- Departments 50 onwards (zone 3) - 6th June
- Non-Residents - 23rd May
The timescales for submission of the return are different for those who run a limited company in France, although if you operate a business as a ‘micro-entreprise’, your business earnings should be submitted with your personal income tax return. Micro-entrepreneurs need to be careful they do not end up paying twice, if they already 'pay-as-you-go' on income tax.
There is no single tax return to complete, as there are different forms for various types of income, all of which is largely consolidated onto Form 2042.
If you are liable for wealth tax, then most households also need to submit their wealth tax declaration with their income tax declaration.
Whilst the process may be a little bureaucratic and complicated, over 50% of residents pay little or no income tax in France. This is because of the comparatively low rates of French income tax, and the tax allowances that are also available.
However, whilst you may pay little or no income tax, you will be liable for payment of the social charges. Although certain pension income is exempt many expatriates are incorrectly charged on their pension income, either because of incorrect completion of the return, or errors by the tax office.
Even though your pension income may be exempt, you are liable for the charges on investment and rental income.