Understanding taxation in France

Taxation in France

Do you have a home in France but maintain residency in another country for tax purposes ? You are still required to pay certain French taxes, including occupancy tax, income tax and television tax.

Income tax

Income tax returns

Income tax returns are completed by taxpayers each year and serve as the basis for calculating taxes owed.

- You must file a tax return if you have a source of income in France, even if you reside in another country. In this case, only your French income is taxable in France.

- If you have no income but have a home in France, your tax liability may be based on a flat rate applied to the rental value of the home.

For individuals who are residents of another country for tax purposes, French taxation takes into account : salaried income received in France, pensions and retirement payments paid by French organisations, income and capital gains earned on French property and income from market investments in France. This income may also be taxed in your country of residence. International agreements signed by France and your country of residence may reduce or eliminate your French tax liability, allowing you to avoid double taxation.

The amount of tax is based on the number of people in your household, including spouse, children and other dependents. The tax rate is progressive and ranges from 0-40% over 5 income brackets. In some cases, a minimum rate of 20% is applied.

Tax deductions

Certain expenses can be used to reduce taxes owed under French law. If the reduction takes the form of a tax credit, the taxpayer gains an additional advantage. When the tax owed is less than the value of the tax credit, the difference is refunded to the taxpayer. Most of these measures are intended for individuals who are residents of France for tax purposes. Non-residents can benefit from a tax deduction when they invest in residences located in tourism complexes.

Tax breaks for saving
A number of savings plans offer tax advantages : Interest earned on Livret A, Livret d’Epargne Populaire and Livret Développement Durable savings accounts is non-taxable in France when paid to a non-resident. Funds deposited by an employer into a Plan d’Epargne Retraite Collectif (employee retirement account) are also non-taxable

Housing-related taxes

Local authorities, including municipalities, departments and regions, impose certain housing-related taxes :

Taxe d’habitation (occupancy tax)

Anyone occupying a residence on January 1 must pay the taxe d’habitation for that year, regardless of whether they are an owner, tenant or guest. Calculation of this tax takes into account :

- the rental value of the unit,
- the unit’s comfort features,
- the composition of the household occupying the unit,
- the tax rate determined by the local authority.

Taxe foncière (land tax)

This tax is payable on all real property owned by the taxpayer. Even if the property is rented, the owner is liable for the property tax. Calculation of the taxe foncière is based on the property’s rental value and the tax rate determined by the local authority.

Redevance audiovisuelle (television tax)
Anyone who pay the residence tax and own a television on January 1 of that year must submit the redevance audiovisuelle. Each household is required to pay the tax only once, regardless of the number of televisions or homes owned.

Impôt de solidarité sur la fortune (solidarity tax on wealth)

Anyone with a net worth greater than an annually re-evaluated limit must pay the impôt de solidarité sur la fortune (ISF). In 2008, the limit was €770,000. Individuals with a tax residence outside France must pay the ISF only on assets held in France, with the exception of financial investments. The tax rate varies from 0.55% to 1.8%, depending on the total value of the assets.