French income tax explained

Whether you are an expat or a native, being a resident in France would place you in a position of being liable for the notoriously intricate systems of French taxation. Specifically, income tax can affect your career or retirement in France as your earnings can be heavily affected. It is therefore wise to develop at least a fundamental understanding of French income taxation.

Income tax in France is obliged to consider worldwide earnings, including employment salaries, investments, dividends, bank interests, pensions and property. As with most tax policies across the globe, the more you earn in France, the more you are taxed in France. However, there are some particular elements that make French tax policies rather distinct and often complex.

The key notion to consider is that your tax is dependent on household earnings rather than individual earnings. Essentially it is your family’s earnings that is calculated by French tax authorities, rather than your own personal income.

To be specific, this tax calculation is commonly divided into multiple “parts”. Working adults, for instance, are placed within its own part, whilst the first two children, followed by successive children are split into their own parts. Collectively, each individual of the family are places within “parts familiales”.

The complete sum is then leveraged against the current taxation thresholds before being multiplied by the number of parts in the family.

Effectively, married or official civil (PACS) couples and families with children are entitled to pay less taxes than households that are compiled of a single individual. Unmarried parents, for instance, who are not in an official civil PACS status, would be taxed separately, with only one of the couples needing to claim responsibility of the household.

In order for the French tax authorities to calculate effectively and accurately, income tax is not deducted at source for an employee’s wage. Every resident of France are instead obliged to complete annual tax returns prior committing to their calculated tax payments.

Furthermore it is important to note that additional taxes, which are dependent on your income, exists and yet are not considered as “income tax”. Social security tax, for instance, is incurred upon source of wealth at 18% (with the employer paying 30%). This tax can vary if the payee is considered to be self-employed, where he or she would be entitled to a 40% social security tax upon the establishment of their business.

France’s Income tax bands 2015

•    Up to 9,690: EUR 0 percent tax
•    EUR 9,691 – EUR 26,564: 14 percent
•    EUR 27,765 – EUR 71,754: 30 percent
•    EUR 71,755 – EUR 151,956: 41 percent
•    EUR 151,956+: 45 percent

If you are an expatriate living or looking to live in France, your assets could benefit from various means of safeguarding and security. deVere France is an entity that houses regulated financial advisers in France, all of which are highly trained to assess your financial circumstances prior to presenting the most suitable solution for your requirements.