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Calculation of French Income Tax

In order to calculate your French income tax liability, your net revenue is divided by the number of household 'parts', called the 'quotient familial'.

It may be no coincidence that France has one of the highest birth-rates in Europe and a system of income tax specifically designed to encourage marriage and procreation.

The quotient familial is a method of determining the amount of income tax you will pay by taking into account the size of your household, as well as certain other personal circumstances.

In effect, it enables a household to divide their net annual income by the composition of the family, before application of the income tax bands.

The net income having then been divided by the number of parts, the income tax bands are applied against each band, with the resultant figure then multiplied by the number of parts.

There are various factors used to determine the number of parts in a household, but broadly speaking each adult is equivalent to one part, and each dependant half a part. So a family of two adults and two children would have three parts.

There are also particular rules for one parent households, and those who are divorced, widowed or disabled.

The date of application of the quotient familial is 1st January of relevant tax year, although the authorities will accept 31st December if it is more favourable to you.

Example

The explanation of how the system works can be best illustrated by an example.

Take the case of a couple with two children, with a net income of €60,000 a year.

The composition of the household results in the income being divided by three before application of the tax bands, ie €60,000 X 3 = €20,000.

The bands and rates of tax applicable to €20,000 are as follows:

  • Up to €5,963 - 0%
  • Between €5,964 - €11,896 - 5.5%
  • Between €11,897 - €26,420 - 14%

This results in an income tax charge of €1,461 for each part.

 Calculation : 

€0 to €5,963 at 0% = €0

€5,964 - €11,896 at 5.5% (€5932 at 5.5%) = €326.26

€11,897 - €20,000 at 14% (€8103 at 14%) = €1134.42

To obtain the tax liability for the household this figure is then multiplied by three - €1,461 X 3 = €4,383.

Contrast this calculation without use of the quotient familial, when application of €60,000 income to the tax bands and rates would have otherwise resulted in a tax liability of €12,434!

The maximum advantage that can be gained from the quotient familial is capped at €2,000 per half part, a ceiling figure that affects only the most wealthy households.

You can read more about the quotient familial at Calculating French Tax Liability

Related Reading

This article was featured in our Newsletter dated 02/05/2013




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