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Overview of Tax Issues for Expats in France

Submitted: January 2014

The French tax year runs from the 1 January to the 31 December.

 

Tax Residence

If you are working in France for less than 183 days you will be considered non-resident and taxed on French source income only. If you stay longer than 183 days but retain a domicile in another country, you will be considered habitually resident and you will become liable for tax on your worldwide earnings. The rules are complex and there are exceptions to the above. For more details see: Taxation - Employment Taxation for Expats in France.

 

Employment/Business Taxes

If you are a resident there is no deduction of income tax made by your employer from your wages or salary. However they will deduct social security contributions. Instead you must pay regular instalments of tax, based on the previous year’s earnings. The marginal (highest) tax rate is 45%. France has a unique way of adjusting the tax you pay to take account of your household status. You will have to fill in a tax return after the end of the year to calculate the final amount of tax payable. If you are self-employed, you will pay income tax based on the profits of your business after deduction of costs. For certain trades, a withholding tax will be deducted by your contractees prior to making payment. For more details see: Taxation - Employment Taxation for Expats in France.

If you come to France to set up in business and start a company, you will be liable to corporation income tax on the profits from your trade or business. The general rate of corporation income tax is 33.33%, There is also a lower rate of 15% applicable to smaller companies. Companies must complete a registration process with the appropriate branch of the Centre de Formalités des Entreprises. The Centre will then pass on the necessary information to the other authorities, including the tax authority. Companies must pay advance corporate and trade tax four times a year. After the end of the year a tax return must be produced by 31 May. For more details see: Taxation - Business Taxation for Expats in France.

 

Other taxes

For residents in France, investment income in the form of interest and dividends is taxed as ordinary income; however there is a deposit against tax which is deducted at source, which can be offset against tax at the end of the year. For residents, rental income is also taxed as ordinary income.

For non-residents, dividend and royalty income is subject to withholding taxes of 21% and 33.33% respectively. There is also a punitive 75% withholding tax for investment income sent to non-cooperative jurisdictions. Only rental income from French properties is taxable and it is treated as ordinary income. For more details see: Taxation - Investment Taxation for Expats in France.

 

Tax treaties

France has signed tax treaties with over 100 countries worldwide. Any withholding taxes payable in France on dividends or royalties paid to persons in other countries with tax treaties in place (or non-residents in France) can be significantly reduced. The treaties also mean that the amount of withholding tax charged by the originating country is reduced on money flowing into France. The amount that can be charged under a treaty is often reduced to between 10% and 15%; in the case of interest it is reduced to 0%. For more details see: Taxation – Tax Treaty Considerations for Expats in France.

 

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