France is a beautiful country located in Western Europe. The country has a taxation system that is governed by the French tax authority, Direction générale des Finances publiques. In this article, we will discuss how the taxation system works in France, double taxation agreements, the main taxes expats need to be aware of, special tax breaks that could apply to expats, how and when to file a tax return as an expat, and tax exit procedures for anyone leaving France to move abroad.
The Taxation System in France
The taxation system in France is a progressive system, meaning that the more you earn, the higher your tax rate will be. The tax year in France runs from January 1st to December 31st, and taxes must be filed by May 31st of the following year.
There are several taxes that individuals and businesses in France are required to pay. These include income tax, value-added tax (VAT), social security contributions, local taxes, and wealth tax.
Double Taxation Agreements
France has signed double taxation agreements with several countries, including the United States, Canada, and the United Kingdom. These agreements are designed to prevent individuals and companies from being taxed twice on the same income.
If you are an expat living in France and your home country has signed a double taxation agreement with France, you may be able to avoid being taxed twice on your income. However, it is important to check the terms of the specific agreement as they can vary between countries.
Main Taxes in France
All residents in France are required to pay income tax on their worldwide income. The income tax rate varies depending on income levels and ranges from 0% to 45%.
Value-added tax (VAT)
The VAT rate in France is currently 20%. This tax is applied to most goods and services, including imports.
Social security contributions
All employees in France are required to make social security contributions. The employer and employee each contribute to social security, with the total contribution being 13.7% of the employee’s salary.
Local taxes in France include property tax and residence tax. The amount of tax varies depending on the location and size of the property.
Wealth tax is levied on individuals who have assets worth more than €1.3 million. The tax rate ranges from 0.5% to 1.5% depending on the value of the assets.
Special Tax Breaks
There are several special tax breaks that could apply to expats living in France. These include:
Foreign tax credit
Expats who pay taxes in their home country may be eligible for a foreign tax credit in France. This credit is designed to prevent double taxation.
Expats may be eligible for tax deductions for certain expenses, including moving expenses and travel expenses related to work.
Filing a Tax Return in France
If you are an expat living in France, you are required to file a tax return if you meet certain criteria. If you are a resident in France, you are required to file a tax return if your income exceeds €10,084 per year. If you are a non-resident and earn income within France, you must also file a tax return.
The tax return must be filed annually by May 31st of the following year. The French tax authority provides an online platform where you can file your tax return, and it is recommended that you seek the assistance of a tax professional to ensure that you file correctly and take advantage of any applicable tax breaks.
Tax Exit Procedures for France
If you are leaving France to move abroad, you must complete a tax exit procedure with the French tax authority. This procedure involves filing a tax return for the year in which you leave, paying any outstanding taxes, and obtaining a certificate of tax compliance.
The certificate of tax compliance is required to obtain a residence permit or visa in another country. Failure to complete the tax exit procedure can result in a fine and other legal consequences.
France has a progressive taxation system, and individuals and businesses are required to pay several taxes, including income tax, value-added tax, social security contributions, local taxes, and wealth tax. Expats living in France may be eligible for special tax breaks, and it is important to file a tax return correctly and complete the tax exit procedure if leaving the country. It is recommended that you seek the assistance of a tax professional to ensure that you comply with all tax regulations in France.