Tax is not most people’s favourite subject but knowing the rules can mean a lot less worry in the long term. As with all tax questions and requirements, our advice is to seek professional advice but here briefly are the main points about taxable income in France
The key rule is of course – if you are a tax resident of France (see our tax residence in France feature if you’re not sure or want to know the rules) then you will have to pay tax on your income – not just earned in France but anywhere in the world – known as impôt sur le revenu.
Tax must be paid on income from:
Earnings – pensions – investments – rental income – bank interest – bonds and capital gains
The scales differ and as at 2012 are undergoing review and change so we advise that you check with a professional who will have the current details and know which rates to apply to which savings. Getting your tax return wrong in France can bring real problems, multiple forms and communication to resolve – it really pays to make sure that you get it right first time.
Employment Income in France
A person employed in France and tax resident will receive their salary net of social security contributions only. Income tax is not deducted at source as it is in some countries such as the UK. In France it is up to the individual to retain sufficient funds to pay their tax liability when it falls due – failure to do so is not a good option.
Self-employment income is taxed in France either by the BNC (Bénéfices Non Commerciaux) regime or the BIC (Bénéfices Industriels et Commerciaux) regime.
Traditionally the earnings of lawyers, doctors, architects, accountants and office holders such as notaries plus other non-commercial self-employed activities are taxable as BNC. More commercial activities are taxed as BIC.
The BNC regime applies to all forms of non-commercial income for instance lawyers, architects, accountants, notaires and doctors. The accounts are prepared on a “revenue” or “cash” basis – income received/ expenses paid within the tax year are taken into account. There are different applications of this system according to the threshold of income.
The BIC method of tax is relevant to commercial and/or trading income and includes rental income of furnished property (gïtes, chambre d’hôtes etc). Income/expenditure relevant to the tax year is included. Again there are different details according to the threshold of income.
In some circumstances a person may choose to pay their income tax, social charges and social security contributions at source. This would then be the final liability on this income.
Tax is payable on bank interest. There are different types of savings accounts with different tax rates – check with your bank manager/accountant to see which applies to your account.
A tax rate of 21% is applied to dividends payments – again this needs to be checked to see if EU company scale rates are applicable.
Pensions are taxed in France at progressive scale rates. Pensions paid in foreign countries may remain taxable in the country of issue but will need to be declared and will taken into account by the French tax authorities in establishing a rate of tax on French sourced income.
It does not matter whether you are tax resident in France or elsewhere – any rental income from a French property is always taxable in France – there is no exception.