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International tax lawyers
For a complete guide about taxation in France, we invite you to read this article and to book an appointment with one of our international tax lawyers.
In France, household incomes are, in effect, pooled and then divided between household members before calculating tax due. It considers the entire composition of the household to determine the number of dependants, and thus the total amount of tax payable. It means that each adult is the equivalent of one unit or ‘share’.
The first two child dependants are counted as half a unit each, whilst the third (or subsequent) children are counted as 1 unit each. The total household income is then divided by the household ‘quota’ number.
Under the principle of “Quotient Familial” – in France, family taxation is based on a “quota”, or number of adults and children within the household. The tax burden is reduced for families with children. In comparison, the UK taxation system is the other way round. The UK’s taxation system is based on an assessment of individual income.
This is typically for this reason that the tax burden for singles is higher.
This article is to help you understand your taxation and its consequences depending on your circumstances.
You could offer you an appointment within 48 hours in our office, also a phone call or video chat.
International tax lawyers
Family taxation
What are the dependants to calculate your taxation?
In France, family taxation is based on a “quota”, or number of adults and children within the household.
Family composition is taken into account when determining tax liabilities.
Family composition for tax purposes is divided as follows:
- The taxpayer
- Taxpayer’s partner (married people or living in a civil partnership called PACS)
- Minor children, so under 18. However, in France, a tax payer can ask for minor children to be taxed separately if they get incomes (from patrimonial assets for example).
- Children over 18 and still live with their parents
- Children that can not provide for themselves whatever their age is.
- Children under 25 if they are students on parent’s request.
For singles and divorced partners, the French taxation system is based on an assessment of individual income.
To sump up:
- Singles are considered as a unit.
- A married couple or in a civil partnership are considered as a unit.
- Cohabiting couples are considered as 2 units.
- Singles such as a widower, divorced individual without any children living with them are considered as a unit.
Can third parties be considered as dependants?
Yes!
As the French taxation system considers the entire composition of the household to determine the number of dependants, a taxpayer can consider any individual living with the taxpayer as a unit. For example, an individual with disabilities or owning ‘la carte d’invalidité’ as DID Card in English – National Disabled identification Card.
No family relationship is required. Incomes are not considered either.
Consequences on a tax return for households
A joint tax return will be filed for married and civil partnership couples. However, there is no exemption for not-living-together married couples with a ‘separation de biens’ property regime. They must file a sole tax return.
For more advice on exemption to a joint tax return, we strongly recommend contacting our international tax lawyer specialists.
Cohabiting couples must file a sole tax return.
A taxpayer must file a joint tax return including incomes of all people living with them.
My children are living with me, is my tax burden reduced?
Yes!
In France, each adult is the equivalent of a unit. Under the principle of “Quotient Familial” – in France, family taxation is based on a “quota”, or number of adults and children within the household.
How many units is counted for a family?
In France, the amount of tax is calculated based on the tax bracket that the divided sum falls into, and the total is multiplied by the quota.
- Each adult is the equivalent of a unit
- The first 2 children are counted as half of a unit
- The third children is counted as a unit as the next ones
- A disabled individual living with a household is counted as a unit
How many units for the children are counted for separated and divorced couples?
Here is an example:
Brigitte and Emmanuel are divorced. They have 3 children. The oldest is Valery, the middle is Barack and the youngest is Lilibeth.
So when they were married, they filed a joint application and Valery was counted as half of a unit, Barack, half of a unit and Lilibeth a unit.
Example no 1: joint custody
It’s a joint custody so basically each unit must be divided in 2, in our example:
- Valery is counted as half of a half unit (0.25)
- Barack is counted as half of a half unit (0.25)
- Lilibeth is counted as half of a unit (0.5)
As Brigitte is counted as a unit, her household taxation will be based on 2 units: 1+0.25+0.25+0.5.
Example no2: the children are living with one parent only
The children are living with Brigitte:
- Valery is counted as half of a unit
- Barack is counted as half of a unit
- Lilibeth is counted as a unit
As Brigitte is counted as a unit, her household taxation will be based on 3 units: 1+0.5+0.5+3
The children are not living with Emmanuel
There is no unit counted for the children, only him. Emmanuel is counted as a unit only.
Example no3: the children are divided between them 2
Valery is living with Brigitte. Her household is then counted as one and a half unit.
Barack and Lilibeth are living with Emmanuel. His household is counted as a unit for himself, Barack is counted as half of a unit and Lilibeth as a unit. His household taxation will be based on 2.5 units.
International tax lawyers
Incomes taxation
What is taxable in France?
You pay tax on:
- Money you earn from employment
- Incomes from a trust
- Money from a company you own
- Dividends from company shares
From adding all of your incomes you will get the taxable amount.
You do not pay tax on:
- Disability allowances
- Relocation package
- Redundancy payment
The subtraction of what you do not pay tax on and what you pay tax on is the taxable amount you will have to pay.
‘L’abattement forfaitaire’ as flat rate expenses in English:
Flat rate expenses or work-related expenses are a sort of tax relief for employees. 90% of the total amount of your incomes are taxed meaning you can claim a 10% flat rate of tax relief set by the French tax system.
This flat rate expense is a set amount of money that an employed individual can get tax relief on for work expenses. This flat rate expense is up to €12,829. This minimum flat rate expense is €448.
‘Les frais réels’ as allowable expenses in English :
These include :
- Travel costs for example fuel, parking, fares
- Office costs
- Food and drink expenses
- Training courses
- Dual residency expenses
Please note that this type of tax relief is only applicable at a taxpayer level. It’s not applicable at a household level.
Thus, for example, if you’re married, you can:
- Opt for claiming flat rate expenses for yourself,
- Opt for claiming allowable expenses for your spouse.
Most of the time, a taxpayer will opt for the most advantageous solution.
Example of an annual French tax return
Emmanuel and Brigitte are married.
Emmanuel is an employee. The total amount of incomes and wages are €40K for 2021.
The amount of allowance expenses is €15K.
Brigitte is a CCEO of a LDT or INC. company.
She’s got €40K from her company. The amount of allowance expenses is €1,000.
For Emmanuel:
If he opts for ‘l’abattement forfaitaire’ so flat-rate expenses:
- incomes: 40K minus 10%. His taxable income is 36K
If he opts for ‘la deduction des frais réels’ so allowance expenses:
- incomes:40K minus 15K. his taxable income is 25K
So basically Emmanuel should opt for the second solution.
For Brigitte:
If he opts for ‘l’abattement forfaitaire’ so flat-rate expenses:
- incomes: 40K minus 10%. His taxable income is 36K
If he opts for ‘la deduction des frais réels’ so allowance expenses:
- incomes:40K minus €1000. his taxable income is 39K
So basically Brigitte should opt for the 1st solution.
How much income tax will you pay if you’re self-employed or a sole trader?
First, it’s worth giving French and UK equivalence.
In France, ‘une entreprise individuelle’ can be translated by a sole trader in English. In France, a ‘BNC’ can be translated by being self-employed.
For tax-purposes these 2 types of companies in France works the same.
‘BNC’ and ‘entreprise individuelle’ in France includes (some examples):
- lawyers
- Notaires, bailiff,
- Writers
‘BNC’ also means ‘Bénéfices Non Commerciaux’ in French standing for self-employment incomes in English and is a way of taxation based on a ‘quota’.
- The ‘micro-BNC’ taxation regime: this type of taxation is for self-employed individuals with a turnover up to €72,5K for 2 years without VAT.the taxable amount is based on the turnover minus a 34% flat rate tax-relief.
- For all individuals who do not want to choose this regime, they are automatically involved into the ‘déclaration controlée’ regime: as self-employed, you must submit a tax return including all of your profits. In France, profits are revenue minus expenses.
Example of taxation for self-employed individuals or sole traders in France
Emmanuel is a lawyer. The turnover is €60K without VAT and with €1K of expenses.
Brigitte is a GP. The turnover is €200K without VAT and with a €50K of expenses.
For Emmanuel:
His turnover is less than €72.5K. He must opt for the ‘micro-BNC’ regime but also for the ‘déclaration controlée’ regime.
- If he opts for the micro-BNC regime: the taxable amount is €60K minus 34% of €60K so €39,6K.
- If he opts for the ‘déclaration controlée’ regime: the taxable amount will be €60K minus 1K of expenses so €59K.
In this example, Emmanuel should opt for the ‘micro-BNC regime’.
For Brigitte:
Her turnover is more than €72.5K. She cannot opt for the ‘déclaration controlée’ regime because her turnover is too high. She must opt for the ‘micro BNC’ regime. The taxable amount will be the profits minus the expenses so 200K – 50K so 150K.
Please note that in France revenues from self-employment, sole trading or micro-companies (name in France) are similar to incomes from employment.
How much income tax will you pay if you’re a business entrepreneur in France?
In France you can choose 2 types of regimes for a company.
You can choose between IR or IS, IR standing for income tax in English and IS standing for corporate tax in English.
| Type of company |
Mnaging Director |
Taxation |
| ‘Société en nom collectif’ as Business partnership |
Managing partner |
– IT based taxation system:
– CT based taxation system: You must a file your tax return by filling the box ‘traitement et salaires’ so ‘incomes box’ |
|
Société par actions simplifiée Société par actions simplifiée unipersonnelle is mid-way between a corporation & a partnership company in English |
CCEO |
– IT based taxation system:
– CT based taxation system: You must a file your tax return by filling in the ‘BIC’ section as trading profits |
| Société à responsabilité limitée as LTD in English |
CEO |
– IT based taxation system:
– CT based taxation system: You must a file your tax return by filling in the ‘company’ section as trading profits |
| Société anonyme as PLC in English |
Chariman of the board |
– IT based taxation system:
– CT based taxation system: You must a file your tax return by filling in the ‘company’ section as incomes |
| Entreprise individuelle (EI) as sole trader |
Self-employment |
|
| Entreprise unipersonnelle à responsabilité limitée (EURL) as LLC |
Single Shareholer |
– IT based taxation system:
– CT based taxation system: You must a file your tax return by filling the box ‘traitement et salaires’ so ‘incomes box’ |
International tax lawyers
Tax relief in France
How to reduce your tax bill?
- Tax deduction in France:
This type of deduction in France must be expenses on:
- Spouse maintenance, children maintenance, elderly care residential expenses, pensions
- Allowance expenses
Please note that the higher your tax band, the higher your tax relief.
For example:
Emmanuel spent €2K by welcoming his mother. The tax relief will be:
- €220 if his tax band is 11% rate
- €660 if his tax band is 30% rate
- €820 if the tax band is 41% rate
- €900 if the tax band is 45% rate
- Tax relief
Tax relief can benefit French taxpayers as it allows you to reduce the amount of tax you pay.
You might be eligible to claim tax relief on the following things:
- Charity donations
- Scholarship expenses
- Travel costs for charity purposes
- Elderly healthcare centre expenses
Please note that when claiming back you will have to wait a year to get a refund.
For example:
Brigitte made a donation to a charity. She files her tax return indicating her donation in 2022 for 2021. She will get a refund within the summer 2022.
- Tax credits
French residents can claim a credit on expenses as it allows you to reduce the amount of tax you pay.
2 consequences by claiming tax credit in France:
- Your income is taxable: your tax will decreased
- Your income is not taxable: you will get a refund.
Tax credit awards are made up of a number of elements.
Among these elements you can have:
- Children under 6 custody
- By employing someone to work in your home
- Home improvements
For example:
Brigitte is employing someone to work in her home. She files her tax return in 2022 with the amount spent for 2021. She will get a refund within the summer 2022.
Income tax relief on maintenance payments
In France, the payer receives tax relief. However, there is a maximum relief.
This means you get a maximum deduction of a certain amount from your tax liability.
For 2022 for example, the maximum relief is:
- €6,042 for child maintenance if the child is over 18 and single
- €12,084 for child maintenance if the child is married or in a civil partnership
- €3,592 for maintenance if it’s to help a family member in need.
Our family law firm can help you calculate the child maintenance amount you can pay or claim.
We use AI which takes into account several parameters such as parents’ incomes, expenses, child custody T&Cs and their needs. The final report can be served in court.
International tax lawyers
Estimate your income tax
Applying the relevant tax bands and rates
In France, income tax is divided into different bands with varying tax rates.
To calculate your tax, you will have to sum your payments, minus your deductions and finally calculate your taxable pay. Under the principle of “Quotient Familial” – in France, family taxation is based on a “quota”, or number of adults and children within the household. It means you will have to take this into account when calculate your tax.
Finally you can calculate your tax due by applying the relevant rates to your taxable income.
French bands with varying tax rates for 2021:
| Band | Rate |
| Up to €10,225 | 0 % |
| €10,226 to €26,070 | 11 % |
|
€26,071 to €74,545 |
30% |
|
€74,546 to €160,336 |
41 % |
| Over €160,336 | 45 % |
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