French Income Tax Return 2021
Tuesday 06 April 2021
The income tax season is approaching and you will soon have to file your French tax return for 2020 income.
For many French nationals, the annual burden of making a tax declaration has become a thing of the past, due to the introduction in 2019 of a Gallic version of PAYE, called 'prélèvement à la source' on salaried and pension income
The changes mean that for around 12 million French households their income each year is now reported directly to the tax authority by their employer, pension provider or bank/financial institution. Many of these households no longer even need to make a tax declaration; they simply verify the information recorded by the tax authority in a 'déclaration automatique'.
However, international households are less affected by the changes, as, unless they are a salaried employee in France or they are in receipt of a French pension, there is no deduction at source. Even where there is deduction at source there is normally other income that needs to be declared.
Those who rent property through a digital platform, such as AirBnB, need to be aware that these platforms are required to advise the tax authority of rental income received by their customers.
The all-seeing eye of the French tax authority and the varied basis on which different types of income are taxed means that there are a number of forms to complete, not made easier by the often arcane language used. International property owners normally need to complete at least three of them, often more.
The forms are:
- Form 2042 – Declaration des Revenus - The main form, with several annexes below.
- Form 2042C – Revenu complémentaire - A diverse form to state investment income, capital gains, and foreign salary or pension income.
- Form 2042C Pro – Revenu Complementaire Professions Non-Salariées - This form records business income, as well as income from furnished lettings. Business owners using the régime réel are also obliged to report separately their results by the use of Form 2031 for BIC earnings and Form 2035 for BNC earnings.
- Form 2042 RICI - Réductions d'impôt /Crédits d'impôt -The form is used if you have an entitlement to a reduction in tax, or a tax credit.
- Form 2044 - Déclaration des revenus fonciers - The form is used for the declaration of income from unfurnished accommodation, but only if you have adopted the régime réel form of taxation.
- Form 2047 - Revenus encaissés à l'étranger - Used to declare income that was banked abroad by a resident of France.
- Form 3916 - Déclaration par un résident d'un compte ouvert hors de France - If you hold bank accounts outside of France you are obliged to declare them, even though they may be inactive. Some local offices do not insist on an annual declaration if there is no change, but best to agree any variation with them in writing.
- Form 2042 NR - Départ à l'étranger ou retour en France -You must submit this form if you left France in 2020 and received, after your departure, income from French sources.
Arguably the process has become more complicated in the last few years by the requirement to make the declaration on-line, and to have to navigate a platform designed by French tax officials.
Only if this is your first year of making a tax declaration, or you have no access to the internet, or you are otherwise simply unable to accomplish the task are you entitled to make a paper return. In the latter case you risk a small fine, although it is not always applied.
Although there are guides available which offer some assistance in completing the declaration, they are generally of limited value, due to the sheer number and complexity of the forms, which cannot be adequately explained in a guide. Moreover, the forms for this year were only published last week, the format of the forms changes from year to year, and yet some guides have been on the market for weeks!
The dates for on-line returns this year are as follows:
- Departments 01 to 19 (zone 1) - 26th May;
- Departments 20 to 54 (zone 2) - 1st June;
- Departments 55 onwards (zone 3) - 8th June.
If you submit a paper-based return the date is 20th May.
For non-residents, the date for submission of your on-line tax return is 26th May. For a paper return it is 20th May.
If you are either a landlord or a business that is taxed on the basis of the régime réel you have until 30th June to submit the specific declarations that are required. It is the same date for those who use a société civile immobilière (SCI).
The year has of course been dominated by Covid, which has had an impact on the tax declaration.
In particular, if you were a business owner and beneficiary of financial assistance as a result of the pandemic, such income does not need to be declared.
Nevertheless, micro-entrepreneurs who have opted to be taxed using the system of 'micro-fiscal/versement libératoire de l’impôt sur le revenu' and who have benefited from a reduction in their social security contributions from URSSAF as a result of Covid, need to indicate that part of their turnover deducted from their URSSAF declarations so it can be assessed for income tax.
In addition, for business owners this year several tax and social security declarations have been merged.
The surcharge on business owners not using an accredited accountant has been reduced to 20% for 2020.
Supplementary hours carried out by salaried employees during part of the year are also exempt up to €7,500 and there allowances for the prime exceptionnelle that was introduced for Covid.
The income thresholds for each band have also been changed, in part due to inflation, but also due to a reduction in the rate of the second tax rate band from 14% to 11%. As a result, the tax deduction that was previously in the mix for those who would only otherwise have a small tax burden has been abolished.
Finally, there have also been substantial changes to the tax credit system for energy conservation, as well as other changes to tax credits, most of which are unlikely to be of interest to most international French property owners.
Normally, local officials are able to assist with completion of the form, but it is not easy to make a visit due to Covid-19. Many staff are working from home. You should ring your local office or view on-line before you visit to check on access.
For those who may be concerned about tripping up on their return, or who otherwise need professional advice, you can contact our tax partner Cabinet Budiz, who are able to offer a competitively priced English language tax service.