I know, I know, thinking about taxes gives us all heartburn. In fact, you’re probably having palpitations just thinking about filing them (the way I felt while researching, writing this guide and when I received my recent tax notice). In a foreign country. In another language. Still, it must be done, and now that you’re here and you’ve delved into the fun stuff in Paris, it’s time to learn how to pay your taxes.
Please note: This is the Second part of our French Income Tax guide. It is published for informational purposes only. Contact a consultant or visit your nearest agency in your arrondissement for detailed help with filing your taxes.
You can read Part one here to get the important basics about this guide.
Let’s get started with this second part with a question.
How to pay your Taxes in France?
You can pay your income tax either online, by check or direct debit in one lump sum, by monthly direct debit, or in three installments.
If your tax bill is only a few hundred euros, you are required to make one single payment by the due date on the notice (un avis d’imposition). Other than that, each year you will receive two provisional payment notices prior to your tax liability for the year being determined. These provisional payments must be made by February 15th and May 15th each year. The amount on the notices is based on your tax liability for the previous year.
The final balance will be due after your tax liability has been determined, either in September or November. Now, if your tax liability is less than the sum you already paid, you will get a refund.
Still with me? Let’s look at some ways you can get some tax relief.
“Anyone Who has the Basics to live should not pay tax, and the tax of one who has the superfluous should go to the extent of all that exceeds its necessary”. - Jean-Jacques Rousseau.
French Income Tax Credits
Tax breaks in France are usually in the form of either tax relief (réduction d’impôt), or a tax credit (crédit d’impôt). A réduction d’impôt is an allowance against the amount of income tax payable, and a crédit d’impôt is a payment to you by the tax authority.
The main tax credits are:
● Home Energy Conservation
● Home Adaptations
● Child Care
Some tips that may apply to you
● You can get a tax credit for doing energy conservation in your home.
● Government regulated savings accounts can get you an exemption from tax and social security contributions on the interest.
● An assurance vie investment gets favorable tax treatment.
● Low income earners get relief from the local property taxes.
● Get a tax break of up to 30% when you rent out unfurnished units.
● Get an allowance of up to 71% for renting furnished units.
● If you’re retired, you don’t pay social security contributions and social charges on your pension.
● Gifts of cash and property to your family can be part of an inheritance planning strategy.
The main tax allowances or reductions available are shown below.
There is a general deduction of 10% for professional costs in relation to salaries and business earnings (with the régime réel) up to a maximum of €12,186 (2015). This is calculated after the deduction of social security contributions. The minimum abatement is €426 (2015 income).
You can choose to deduct professional costs: travel to work, meals, tools and clothing, but you must keep your invoices and receipts as proof. There are rules that govern how these costs are deducted.
In this regard, a 10% deduction is allowed, with a minimum of €379 and a cap of €3,711. The allowance is per taxpayer, although the maximum is per household.
In addition to the 10% allowance, for those aged over 65 years on 1st January of the tax year, a fixed sum is deducted from your total net income before you become liable to income tax.
These same deductions apply to someone who is disabled.
With total net income per household of less than €14,220 the deduction is €2348; between €14,730 and less than €23,730 the deduction is €1174. With a net income €23,730, no deduction is available. These allowances are doubled for a couple each aged over 65 years.
There is a deduction for a child’s education, called les frais de scolarité. It’s €61 for a child at collège, €153 for a child at lycée and €183 for a child at university.
Parents who provide support (pension alimentaire) to their adult-aged children can deduct those costs from their income tax. If the children who live with you are under 21, or less than 25 and in school, you can:
● Either opt to attach them to your fiscal household or;
● Charge the support you provide to them against your liability to income tax.
This tax deduction is available whether or not the child(ren) lives with you, and irrespective of their age, activity, marital status or place of residence, including outside of France.
The amount of the maximum deduction varies according to the circumstances of your child.
● For a child who is single the deduction is €5,732 for each child, per year.
● If you are single, divorced or widowed, the deduction for each child is €11,464.
● If the child is married or in a civil partnership the deduction is €11,464, only if they are not supported by both sets of parents.
Where the child does not live with you, you may be required to demonstrate to the tax office the payments or other forms of support you have given with them.
A tax allowance of 50% against the costs of domestic help at your home is called l’emploi d’un salarié à domicile. The duties can include cleaning, gardening, driving, child care, health care, and so forth. An ‘au pair’ is not eligible and there are other exclusions and limitations. Gardening costs are only eligible up to a maximum of €3,000. There is also a basic cost ceiling of €12,000, giving a maximum allowance of €6,000.
Long-term Nursing/residential care
The costs of those receiving long-term nursing or residential care are eligible for a tax allowance of 25% against maximum eligible costs of €10,000, in short, €2,500.
For payments to an ex-wife or ex-husband within the first year of the divorce settlement, there’s an allowance of 25%, to a maximum of €7,625.
An allowance of 75% up to a maximum tax reduction of €479.
There are a variety of tax concessions if you’re interested in investing in companies, woodland, tourism properties, and other areas. Seek a reputable financial consultant to go over your options.
Students and Apprentices
Money earned by a student under 26 years of age is not taxed until they earn more than €4,336. When they pass this number, they only declare the amount in excess of that figure. An apprentice does not pay income tax until they earn more than €17,490 per year. If less than a year, then it is adjusted on a prorated basis.
“ Taxes are only money lent; they come from the people, they must return to the people”. - Napoleon Bonaparte
It was a significant challenge to find this information and summarize it in a manner that would be helpful to a reader. Much of the data in this article was found on these extremely helpful and well-researched websites: French Property, Expatica, French Tax Online.
As you have seen, the French Income tax system can be very complex. Take your time, seek the help of a professional or expat friends experienced with filing in France, and all will be well.
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