The French tax system might be confusing, but it is worth investigating if you want to make the most of your stay abroad. The French government levies a number of taxes on its residents, including expatriates. The good news is that most expats may decrease their tax obligation by taking advantage of advantageous tax treaties.
Residents in France will have to file a French tax return or ask for a specialist like Elitax to do it. This is largely to pay income taxes, property sales taxes, and taxes on considerable personal wealth. As in other countries, you may be subject to capital gains tax on assets sold.
What exactly is an expat?
People who have left their native nation to work or reside in another country are known as expatriates. They may be citizens of the nation in which they live, or they may be citizens of another country. As previously noted, expats frequently benefit from a variety of tax breaks.
Treaty on Double Taxation
A double tax treaty is an agreement between two governments to prevent money from being taxed twice. This implies that each country’s people will only be taxed on money generated in that country. A provision for tax relief in the case of cross-border payments, such as interest or dividends, is frequently included in the treaty.
France has double tax accords with a number of nations. Click here to see whether your nation is included on the list. If your home country has a double tax treaty with France, you will only have to pay taxes in the nation where you earn your income.
Permanent or Temporary Residency
In France, taxes are levied based on where you live. If you spend 183 days or more in France, you are considered a resident for tax purposes. If France is your “main abode,” you will also be deemed a resident.
The location of your primary house is determined by variables such as your personal and professional interests. For example, if your home country is the United States and your business is in France, France will be deemed your primary residence under French tax regulations.
You will be obligated to pay income tax after your permanent residence is confirmed.
The fiscal year
In France, the fiscal year coincides with the calendar year. It begins in January and concludes in December. This implies that tax returns must be filed on or before the end of June of the following year for those submitting online forms, and by the end of May for those filing offline returns.
After determining the tax due, the payment has to be made in four monthly payments beginning in September and ending in December. Individuals or families that desire to participate in the PAYE plan must pay advance tax.
Those who file their tax returns late are subject to a 10% late payment penalty.
Who needs to file a tax return?
Any person who is a tax resident in France is obligated to file a tax return. This consists of
- Citizens of France who get income
- Receiving income from France
- Expatriates who have made their home in France
- Individual returns must be filed by unmarried persons, however those in a marriage or civil partnership can choose to file combined tax returns.
You can file individual or joint tax returns if you are married or in a legally recognized civil relationship. Individual tax returns must be filed if you are single.
Household Situation
In France, taxes are collected on “household units” rather than individuals. In order to levy taxes,
Adults who are married or in a civil relationship are considered as one.
The first two offspring are counted as half of the total.
As a result, a home with two parents and two children is considered to have three distinct components. A family with two parents and three children is considered to have four distinct sections.
The taxable income is calculated by dividing the total family income by the component portions.
Other levies
Aside from income tax, expats and other residents are subject to a variety of additional voluntary and mandatory taxes, including :
- TV license tax or audiovisual redevance
- The council tax, also known as the taxe d’habitation, is a type of tax levied by the government.
- Capital gains taxation
- Property tax or fonciere tax
- Inheritance taxation
- TV license tax or audiovisual redevance
The TV license tax is a mandatory yearly levy that all French families must pay. The amount payable is determined on the number of TVs in the home. A family with a single television must spend €133. Households that wish to avoid this tax must claim on their tax return that they do not own a television set.
The Council Tax, often known as the Taxe d’habitation, is a tax levied by the government
The Council Tax, sometimes known as the Taxe d’habitation, is a municipal tax collected by communes in France. It is based on the house’s rental value. The taxe d’habitation is charged on all properties in France, regardless of their status.
Capital Gains Taxation
Profits from the sale of assets such as stocks, real estate, or enterprises are subject to capital gains tax.
Property tax or fonciere tax
Property tax, analogous to taxe d’habitation, is charged on property owners regardless of occupation. It is also dependent on the property’s rental value.
The inheritance tax
Inheritance tax is charged on the deceased’s estate. The tax is paid by the estate’s beneficiaries. The tax rate is determined by the beneficiary’s relationship to the dead.
Inheritance tax is also levied based on the taxpayer’s residency status. If the dead was a resident, their whole international estate will be liable to inheritance tax in France. If the dead was a non-resident for tax purposes, only their property in France is taxable.
Regime of Expatriates
Aside from the tax legislation outlined above, the French government has created a “Expatriate regime” for employees and professionals who were not tax residents in France for the five years before their present job in France.
Status of eligibility
This regulation only applies to expats who work in France and have their primary domicile (as described above) in France.
Caveat
The French government has the authority to amend the tax regulations at any time. You are subject to French income tax as an expat in France, and you may also be subject to other taxes in your home country. As a result, it is important to consult a tax professional to assess the exact applicability of the regulations to your unique situation.
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