The French Tax System: An Informative Guide For Expats (2024)

France attracts ex-pats from different parts of the world. Being a nation that is famous for its rich art, culture, and heritage, the country has for a very long time been one of the top destinations on the list for ex-pats.

There are many Americans and UK citizens that have set up permanent bases in France’s countryside, as well as along its numerous scenic beaches.

However, what many ex-pats lose sight of is the fact that the taxation regime in France works differently as compared to other parts of the world.

The French system requires a deeper understanding of brackets, international treatises, and social security. In this guide, we are going to look at some important aspects of taxes in France for ex-pats.

If you are someone who is already living in France or is planning a move from any other country in the world, this article is going to help you with information and knowledge. Specifically, we are going to offer ex-pats with French tax advice so that they do not run into any problems.

A General Overview Of The French Tax System

The French taxation system is under the operation of the French Ministry of Economy and Finance. Here, the tax year is the same as the calendar year (1 January to 31 December).

In general, a taxpayer in France needs to pay a range of Federal taxes in the country. These taxes include income tax, investment taxes, and taxes on property, inheritance, and wealth.

Furthermore, a company that operates in France needs to pay corporate tax on their income and value-added tax (VAT).

In addition to that, in 2019, France also came up with a pay-as-you-earn (PAYE) tax system. As per this system, employees can pay income tax as part of their monthly pay rather than paying taxes annually.

In France, the highest income tax bracket is 45% (applies to earnings over Euro 177,107).  Furthermore, in the new 2024 Finance Bill, the government increased the standard income tax brackets and social security ceiling by 5.4%. As a result, the tax bill for workers in France will now be lower.

The French Tax System: Who Is Liable To Pay Taxes?

According to leading financial and taxation experts, the following four categories of individuals should pay taxes in France-

Permanent Residents?

According to French taxation laws, if you are an ex-pat whose primary place of residence is in France (your spouse and children stay here), you will be considered a French resident and, hence, will have to pay taxes.

Residence For More Than 183 Days?

According to the rules and laws mentioned in the tax codes, an individual who has stayed in France for more than 183 days needs to pay taxes. These 183 days need not be consecutive and can be in one calendar year only.

Your Primary Job, Business, or Vocation Is In France?

A professional from another country who is stationed in France or an entrepreneur who is conducting business, has offices, or employs French nationals in work is required to pay taxes.

You own Property And Other Assets In France?

There are many that own and operate the property in different parts of France. While your primary place of residence is not taxed (it was abolished in 2021), the second and third homes that you have will incur taxes.

Property taxes in France on the second home are carried out after a formal assessment. This assessment takes into account the condition of the house, its size as well as the property rates in the neighborhood it exists in.

The French Tax System For Expats

Generally, France is one of the most influential countries in the world and has a big network of taxation treaties. As a result, France can make its residents avoid double taxation if they are living overseas. However, since each of these treatises is long and complicated, it can be difficult for many to comprehend.

Hence, you must consider seeking expert advice if you do not understand how France has an agreement with your home country. This will ensure that you have a good idea of whether you are overpaying taxes in France or not.

Since France is part of the Automatic Exchange of Information (AEOI) policy, it seeks to fight tax evasion. As a result, it strictly asks for transparency from financial intermediaries when it comes to their clients’s tax residence in signatory countries.

Types Of Personal Tax In The French Tax System Expats Must Pay

In this section, we are going to look at the four major types of personal income taxes ex-pats have to pay in France-

1. The French Personal Income Tax
2. Contributions with regard to Social Security
3. VAT, which is taxes on goods and services
4. Occupier’s Taxes on Property

There are different categories when it comes to occupier’s taxes in France. For example, if you are selling a property whose valuation is more than 1.3 Million Euros, you will have to pay Capital Gains Tax on the same.

Expats need to pay attention to the changes that have come about in the taxation structure. Ever since 2019, you are no longer required to pay taxes for the prior year, as had always been the case. From 2019 onwards, the French government has introduced a system known as PAYE.

In the PAYE system, tax is deducted at the source every time you make an income. PAYE stands for “Pay As You Earn” and has been done to make the entire process much more efficient and streamlined. Taxes work as monthly payments that are paid to the taxation authorities.

PAYE is not only taken for monthly income from salaries of business gains. It also includes everything from retirement income and pension, any international gains, rental bills, and income, as well as maternity leaves.

How Does The French Tax System Deal With Tax Avoidance And Evasion?

In recent years, France has been facing a rise in tax fraud. For example, in 2022, France lost Euro 14.6 billion to tax fraud. This amount increased from the numbers in 2016-19.

The following are some of the major tax fines and penalties that apply for tax avoidance and evasion in Frace:

• Underpayment of taxes is subjected to fines. For example, if you make minor errors in payments (5% or less), there might not be a penalty if you rectify them within 30 days. Furthermore, there is a recovery procedure for more serious errors.
• However, in other cases, you will need to pay a penalty ranging from 10% to 80% of the tax that you owe. Furthermore, there is also an interest charge of 0.4% on the unpaid tax.
• In addition to that, if someone commits serious tax fraud, the government may seize the assets of the individual and begin legal proceedings.

The Bottom Line

Navigating the maze of the French tax system can be confusing for any ex-pat. This is why almost all financial experts recommend that ex-pats should work with an expert and specialized accountant who can help them with all their taxation-related filings and paperwork.

If you have any questions or would like us to assist you in any way, please let us know in the comments below. We would be more than happy to assist you with regard to your queries on French taxes.

Read Also: