Taxes in Europe Database v2
essentially articles 1 to 204-0 bis of the tax code ("code général des impots"), its appendices, and articles 236 to 248 G of the tax code for the income of individual companies subject to personal income tax ;
tax law changes are set in the Budget acts (four in 2011, four in 2012, two in 2013, three in 2014).
The geographical scope of the french personal income tax consists of the mainland France, Corsica, overseas departments (which includes the islands of Saint-Barthelemy and Saint-Martin), Guadeloupe, Réunion and Martinique, but not the overseas territories nor the terrirorial collectivity of Saint-Pierre-et-Miquelon.
Subject to the provisions of tax treaties for the avoidance of double taxation, regardless of their nationality, persons not fiscally domiciled in France are taxable in France on their income from French sources only.
The income tax is adapted to personal circumstances by means of a income splitting system.
Aggregated family income is divided by a number of shares (one share for a single person, two shares for a married couple or two life partners who have signed a civil marriage, an additional half-share for each of the first two children or dependents, an additional share for each child or dependent thereafter).
The progressive tax schedule is applied to the taxable income per share. The tax per share is then multiplied by the number of shares to determine the gross amount of tax payable.
As a general rule, the tax benefit from the income splitting system is capped at € 1,500 for each additional half-share.
The personal income tax is levied on all natural persons. The tax unit is the tax household : the person returning the file, his or her possible spouse, their possible children and the other possible dependents.
As a general rule, revenues are taxed with a lag of one year: the personal income tax for 2015 (P.I.T. 2015) is calculated on the revenues earned in 2014. However, the taxation of real estate gains is made at the time of the transaction.
Regardless of their nationality, persons domiciled in France for tax purposes are taxable on their worldwide income.
Subject to the provisions of tax treaties for the avoidance of double taxation, regardless of their nationality, persons not domiciled in France are taxable in France on their income from French sources only.
Benefits in kind are basically taxable. However, there are many exceptions: restaurant vouchers(if their value is less than € 5.36); the reimboursement by the employer of 50 % of the public transport expenses; meals at cantine (if the employee pays more than € 2.32 per meal).
Professional expenses (comuting, catering and documentation) are included in the 10 % deduction on wages and salaries. Instead, the tax payer can choose the deduction of the same actual costs. More generally, expenses can be deducted from business, non-commercial or agricultural profits, if they contribute to one of these activities.
The main deductions or expenses for each category of income are as follows.
Wages and salaries
All expenses involved in earning or maintaining income. In the case of employees, occupational expenses are fixed, as a general rule, at 10% of the declared income, with a minimum of € 426 or € 936 in the case of the long term unemployed (over one year of unemployment) and a maximum of € 12,157 for expenses incurred in the 2014 tax year (P.I.T. 2015).
However, the tax payer may choose between this deduction at a standard rate and actual justified expenses.
An allowance of 10% is granted for pensions and free life annuities. This allowance has a minimum of € 379 per person and may not exceed € 3,707 for total pensions received by a household.
An allowance (from 30% to 70%) increases with the age of the taxpayer (from less than 50 years to more than 70 years).
An allowance of 40% is applied to the dividends.
Income from real property
If the gross revenus is less than € 15,000, the sum-lump deduction is 30%. Oherwise, the actual expenses of property are deductible.
Capital gains on real property
The taxable base is equal to the difference between the sale price and the purchase price paid by the seller (or the market value if the property was acquired free of charge), plus, where relevant, certain exhaustively specified expenses and charges. Relief equal to a percentage of the gross capital gain increasing with time is deducted. In practice, this relief means that capital gains on the sale of a property owned for more than thirty years are exempted.
The sale of the main residence is exempted.
Alimony for children, legal or volontary, are deductible from the global income.
Interest on mortgages : a tax credit is allowed for the purchase of the main home still exist, on condition that the loan offer was made before 2011 and that the purchase occured before the end of September 2011.
Losses in a category of income are set off, in principle, against other kinds of income. Any overall can be carried over the total income of the subsequent six years.
Tax reductions and tax credits for which the tax payer may be eligible are deducted from the gross amount of tax payable to determine the net tax.
As a general rule, only tax credits are refunded to the taxpayer.
The most important tax credit in amount is the Earned Iincome Tax Credit (“prime pour l'emploi”) which was created to encourage the return to work or continued employment. The EITC will be suppressed as of the 2015 income (P.I.T. 2016).
The total benefit resulting from specified tax breaks (mainly tax reductions and tax credits) is limited, for the 2014 income (P.I.T. 2015) to € 10,000. This cap applies only to tax breaks granted in return for an investment or a service provided to the taxpayer.
The previous first bracket (rate of 5%) is supressed in 2015.
If the tax ranges from € 61 to € 1,135 (for a single) or to € 1,870€ (for a couple), it is decreased by a discount equal to the difference between € 1,135 (or €1,870) and half of the tax. If it is under € 61, the amounts are not collected.
A exceptional contribution on high revenues is based on the reference taxable income (“revenu fiscal de référence”). The tax rates are :
Capital gains on immovable property
The rate is 19% in 2014. The relief on gross capital gain increases with time, with a total exemption of taxation after twenty two years. However, the sale of the main residence is exempted.
Variable-yield securities (dividends and similar income) and fixed-income securities distributed by French or foreign companies are liable to income tax at progressive rates (2014 income, 2015 P.I.T.). A creditable withholding tax is however applied on these revenues (in 2014, creditable on 2015 P.I.T. ; in 2015, creditable on 2016 P.I.T.).
The income tax return has usually to be sent to the tax administration before the end of May. When Internet is used, filing deadline depends on the place of residence.
Taxpayers are informed of their net income tax liability several months after filing their income tax return by means of a notice of assessment sent to their domicile, which also states the payment date.
Tax is generally paid in two estimated advance tax payments, before February 15th and May 15th, equal to the third of the prior tax liabilite. The balance is collected generally around September 15th.
Taxpayers may opt for monthly instalments : payment is made by monthly direct debit of one-tenth of the previous year's tax bill between January and October, the balance being paid in the last two months.
As a general rule, by means of entry in a tax roll. In that case, the personal income tax is collected by the Public finances general directorate (“direction générale des finances publiques”).