French Tax Law
Firstly, remember that French tax law can change tax rates annually. To stay up to date on rates you should check for the latest information on the Impots Gouv website.
However, many of the common questions we get are about the principles of French taxation and these tend not to change.
French Tax Law FAQ
Capital Gains Tax for Non Residents
For non residents capital gains on property are subject to a withholding tax. The withholding tax rate depends on the domicile of the taxpayer with a much lower rate applying to EEA residents. A social contribution charge me be levied on top of the withholding tax. Following Brexit, UK residents will see their French capital gains tax bill double if the UK leaves the EEA.
There is a Capital Gains Tax allowance which you can set against the capital gains tax and social security tax charge. However, you must have owned the property for many years to qualify.
Finally, the notaire always collects any tax due directly from the sale proceeds so there is no escape.
Tax on Rental Income
Property income will be charged as either a personal or a business tax, depending on how you own the property. The nature of the property, for example furnished or unfurnished, and location affect tax rates and allowances.
There a various offsetting tax allowances, but these tend to be complex. We have a separate page covering Tax on Gite Income giving further details.
If you own and occupy the property yourself, you will be liable for both taxes. However, if you let the property, you will be liable for the ownership tax and the tenant will pay the occupancy tax.
Inheritance and Gift Tax
Inheritance tax is due in France on any assets domiciled in France.
International tax treaties provide some mitigation but, especially for property, the Code Napoléon is the guiding principle. In effect the Code dictates the framework for inheritance. Recent law changes have modified its impact inheritance is broadly by the bloodline not by preference of the deceased. We have a page covering some options to help you Mitigate Inheritance Tax.
Gift tax will be applied in a similar way but, unless the gift is of property, non residents normally can arrange their affairs to avoid this.
This is a favourite, though largely illusory, bête noire for French non residents but an essential part of French tax law.
In principle French wealth tax, called ISF in France, affects all non residents with property in France.
In practice, some simple but sensible tax planning will save you being subject to ISF.
Double Taxation Treaties
France, latterly as part of the EU, has signed double taxation treaties with most nations and these have been incorporated in French tax law. You should not therefore find any overall increase in your tax bill by paying some or all of your tax in France.
There is one caveat. Whilst dual taxation agreements apply to the structure of taxes levied they often do not cover tax rates. Accordingly, your worldwide income may be considered when your French rate of taxation is decided.
The surcharge of social contributions on capital gains and property by non residents is a live issue in France.
The issue was appealed to European Court who ruled:
“Regulation No 1408/71 must be interpreted as meaning that levies on income from assets, such as those at issue in the main proceedings, have, when they contribute to the financing of compulsory social security schemes, a direct and relevant link with some of the branches of social security listed in Article 4 of that regulation and thus fall within the scope of the regulation, even though those levies are imposed on the income from assets of taxable persons, irrespective of the pursuit by them of any professional activity. ”
However, it is possible that the court ruling will not be the last word on the subject.
High Income Taxation
There are special provisions which affect companies paying and individuals receiving high salaries.
The political party in power sets this legislation ideologically and so you should review the details on every change of government.