Moving to France – Taxation
Finance and Tax in France is one aspect that you need to investigate before you arrive in your new home whether employed, self-employed or setting up a business.
Arriving in France to begin your new life needn’t be a stressful time.
If you have planned everything correctly and carried out all your research then you should arrive ready to explore your new home and marvel at the delights that France has to offer.
You certainly don’t want to be bogged down with financial woes and lots of pen-pushing as you fill in form after form wondering why you thought it was a good idea to move in the first place.
Let’s take a look in greater detail at finance and tax in France, what you are expected to pay and what you need to do to ensure that everything is in order as you begin your new life.
Tax obligations when moving to France
Income tax, much as it pains us all, is something that we will have to pay almost everywhere we go and France is no exception.
First of all, you need to ensure that your affairs are in order with the government tax department of your home country.
If you are moving part way through a tax period, you should inform them that you are moving out of the country and that you expect not to be returning in the near future.
Do you need to self-assess for a part of the year or have you paid as you earn through your salary?
If you have been taxed through your salary it may be that you are entitle to a refund which will probably be calculated at the end of the tax period.
If you are going to continue to make an income through interests in your former country do you need to still pay income tax?
Different systems for finance and tax in France will mean that if you are intending on making France your permanent, or your main residence, you will be subject to French tax regulations as soon as you arrive in the country.
It is a good idea to consult a tax advisor or at least to carry out extensive online research as to what applies to you before you move.
Income tax rates in France
The income tax system in France is a little complicated. It is calculated by household where there is more than one salary and the income share is divided into equal parts, with children being considered half a part.
Once this is established the income is then taxed accordingly.
The exact calculations vary depending on number of dependents.
Essentially if you earn up to €9,710 as a household then you pay no income tax.
If you earn between €9,711 and €26,818 then you pay 14%, between €26,819 and €71,898 is 30%.
The next level is €71,899 and €152,260 which is subject to 41% tax and then the last level is above €151,261 which is subject to an income tax rate of 45%.
The exact calculations will vary depending on your circumstances and again, if you would like to know how this applies to you then we recommend that you investigate this further as with everyone’s circumstances being different it is difficult to make accurate predictions.
Social security contributions in France
If you are living and working in France then you are expected to make social security contributions to receive benefits in return.
These contributions are probably the most important factor in the finance and tax in France requirements.
The social security system is called ‘la secu’ and is separated into ‘regimes’.
There is the general scheme for the employed and students, the self-employed scheme, unemployment and supplementary pension schemes, agricultural schemes and special employment schemes for the military and others.
The general schemes covers employees for sickness, maternity and paternity, family benefits and is compulsory.
Your employer should arrange for you to join this scheme along with the unemployment and supplementary pension scheme.
Income tax is calculated once social security contributions have been deducted.
If you are self-employed then you need to ensure that you register to make contributions.
Corporate tax in France
Currently the corporate tax rate in France is 33.3% however it should be noted that this will progressively reduce to 28% by the year 2020 in line with the 2017 CIT act.
It is important once you set up your company that you register for corporate tax and social security.
For companies based in France then you will be taxed only on profits in France.
If you have branches abroad or other interests abroad these will not be liable to French tax however you need to ensure that you are declaring them to the relevant authorities.
If you are moving to France to set up a new branch of your company that operates in a different country you will only pay taxes in France for your French operations.
VAT in France
VAT in France is known as ‘Taxe sur la valeur ajoutée’ or TVA and France was the first country to introduce VAT in 1954.
There are currently 4 rates of TVA in France which are the standard rate of 20%, 10% which applies to businesses like restaurants and renovation works, 5.5% for goods like food and non-alcoholic drinks and 2.1% which applies to the sale of live animals and TV licensing.
At the beginning of 2017 the VAT registration threshold for French resident companies rose from €32,600 to €33,200.
For non-resident companies the threshold is nil and for those distance selling online who have a registration threshold of €£35,000.
It is important to register for VAT or TVA as soon as you think you will reach or have reached the threshold.
Other French taxes
Whilst the main taxes are income tax, corporate tax and VAT there are other taxes levied by the French authorities.
These include the French property tax or Taxe d’habitation, a TV license tax, French capital gains tax, wealth tax and inheritance tax.
It is not any different to other countries in Europe in terms of the various taxes but there are some differences that you may not be familiar with.
To ensure that you are registered for and paying the relevant taxes, at the correct amount, it is a good idea to carry out thorough research beforehand and to consult a tax advisor that is familiar with all forms of finance and tax in France.