French tax Residents
Whether residing in France or not, if you receive income from a French source, such as rent, for example, you must declare this income and file a tax return in France. There is no reporting threshold, any income must be reported even if it is not taxable.
To determine your tax liability, the French tax authorities will first determine your total income, called your total “gross income”. Adjustments will then be made, to obtain your net taxable income.
Your tax liability will be calculated gradually, depending on the composition of your household and the level of your income. The Income tax in France is calculated at the level of the “tax household”.
The household is composed of all the individuals collectively joined and constitute a single tax payer. Note that a single person may constitute a tax household.
The tax is levied by the French government and concerns all income received by the member or members of the tax household (salary, property income, etc.).
To be liable for income tax, you must be domiciled in France for tax purposes. Persons domiciled abroad for tax purposes may be liable to income tax in France when they receive income from French sources.
the Income-tax is progressive in France, the higher the income, the higher the rate. This tax is calculated on the basis of a scale updated annually. The scale consists of 5 brackets.
The following is a summary table of the different tax brackets for income for the year 2020.
- Up to 9.964 €: 0%;
- From 9,965 € to 27,519 € : 14.00%;
- From 27,520 € to 73,779 € : 30.00%;
- From 73,780 € to 156,244 € : 41.00%;
- Over 156,244 € : 45%.
However, the tax calculation method is not simply limited to net taxable income in euros. Here are a few steps to understand the process.
First, divide the net taxable income by the number of shares of the “family quotient”.
In France to calculate the tax we consider the family situation. Is the taxpayer single, in a civil union, with children, dependent parents? The number of people in the tax household determines the family quotient.A single person, divorced or widowed, counts for a single part in the calculation of the family quotient.
For married or “pacsed”(civil union) taxpayers, each member counts for “one share”. The family quotient will then be equal to 2 shares.
Where there exist dependent children, the first two dependent children each account for half a share, then a full share per child is counted from the third.
- For a single person with a net taxable income of 30,000 €, the family quotient is on one share. The calculation will be as follows: 30 000/1 = 30 000€.
- For a couple with two dependent children with a taxable income of 58,500 €. The couple forms 2 shares, the two children contribute an additional share (0.5 per child). The calculation will be as follows: 58 500€/3 = 19 500€
The progressive tax scale must then be applied to the result obtained (see scale above)
For a single individual With an income of 30,000 €, he/she will be taxed in 3 fractions.
– For the fraction of income up to 9,964€ tax = 0% tax
– Between 9,964 € and 27,519 € (27,519 – 9,964) = 17,555 taxed at 14% i.e. 2,457.70 €
– Between 27,519 € and 73,779 € (30 000-27 519) = 2,481 taxed at 30% i.e. 744,30 €.
The single person’s marginal tax rate is 30%, but the first 27,519 € is taxed at 14%. The result will then be 0 + 2 457,70 + 744,30 = 3 202 €
For a married couple with two dependent children
We will use the result obtained when calculating the family quotient, i.e. 19 500€.
Up to 9 9 964 € tax = 0% tax
Between 9,964 and 27,519 € taxation (19,500-9,964) = 9,536 € taxed at 14% i.e. 1,335.04 €
The marginal tax rate for this family is 14%, but the first €964 is not taxed.
The result will be 0 + 1335,04 = 1 335,04€
Finally, multiply the result obtained by the number of shares of the family quotient
Once the progressive tax scale has been applied to the result obtained when calculating the shares, it must be multiplied by the number of shares.
For a single person
As seen above, the latter has only one share , so the calculation is 3 202 x 1= 3202€
This single person will, therefore, have to pay a tax of €3,202
For the married couple with two children
As seen above, this family has 3 shares, because each of the spouses counts for one part and the children for 0.5 share.
The calculation will be 1,335.04 x 3= 4,005.10€
This family will then have to pay a tax of 4,005 €
A simulator is available on the French tax website here : https://www.impots.gouv.fr/portail/simulateurs
Please note however, multiple other factors may be considered in the calculation of your income tax, particularly if you earn foreign revenues or are subject to specific investments, bonus or credits.
Just as for residents of France, your income tax is calculated using the progressive income tax scale and factoring in income splitting.
As a non-resident, French income that you earned after leaving France liable for tax in France under the international tax treaty signed between France and your country of residence will be taxed at a minimum rate of 20% (14.4% for income earned in France’s overseas départements). French and foreign income (worldwide income) that you earned prior to leaving France is liable for tax as for French residents.
For example: if you left France in 2017, you would be taxed like a French resident on worldwide income earned between 1 January 2017 and the date of your departure, and like a non-resident from the date of your departure until 31 December 2017. In 2018, under international tax treaties, you would be taxed like a non-resident only on your French earnings taxable in France.
Please note : You cannot use the income tax calculator on the impots.gouv.fr website. At present, the calculator is only for residents of France.
The text “minimum 20% tax rate applied” will appear on your tax notice for your earnings that are taxable as a non-resident.
This rate may be adjusted downward if you can prove that the French tax rate on all of your worldwide earnings (i.e. both French and non-French) would be less than 20% (or less than 14.4% for income earned in France’s overseas départements).
Expert-Comptable – Chartered-Accountant