FAQ - Income Tax, Inheritance Tax, Wealth Tax
For specific questions regarding the Taxation of Rental Income, please follow the link.
INCOME TAX AND LOCAL TAXES
1 - I retired in the United Kingdom and receive a pension taxable in France. When do I have to pay the French income tax?
When pensions paid by a French pension plan to a UK resident are taxable in France, the tax is withheld at the time of the payment of the pension. However in certain cases (multiple pensions or pension exceeding a certain amount), you must file an income tax return 2042 in May-June of the following year and the regularization of the payments is made by the "Service des Impôts des Particuliers des Non-Résidents".
The tax return must include the details of the taxable pensions and of the withholdings.
The French tax system is based mainly around five types of taxes. More details are available on French Taxation.
income tax and social contributions;
local taxes (real estate tax or "taxes foncières", occupant tax or "taxe d’habitation" and business tax);
the value-added tax;
the registration tax;
the wealth tax.
3 - I am planning to move to France and work for a company in France. When do I pay the French income tax?
For employed people, besides the social contributions which are withheld, the French tax is paid only the year following the perception of the income.
Thus, income tax on wages 2015 is paid in 2016 in three installments or in monthly payments (from January to October with regularization at the end of the year) based on the tax paid for the previous year.
When there is no tax reference (new taxation or no taxation on the previous year), the tax is paid only at the time of the reception of the tax statement of the year following the perception of the income.
Thus, a taxpayer who settled in France in January 2015, will have to file his first income tax return in May 2016, and pay the corresponding tax at the reception of the tax statement which should reach him during the end of the year 2016.
Financial and property holdings income :
To the personal income tax are added the "Contribution Sociale Généralisée" (8.2% of the income), the "Prélèvement Social" (5,4%), the "Contributions Additionnelles" (1.1% and 0.30%) and the "Contribution pour le Remboursement de la Dette Sociale" (0,5%). These additional taxes are usually withheld from the income received by individuals, or are calculated on a separate tax notice.
The French income tax is usually calculated by application of a progressive rate.
For taxpayers domiciled or residing in France, this rate can be applied by taking into account, not only the income exclusively taxable in France, but also the exempt income or the income exclusively taxable in another country (articles 170, 197 C of the French Tax Code). This rule known as of the "taux effectif" applies for example :
to the foreign employees of international organizations, who are not taxed in France on their compensation from the international organization; or
to the people receiving a pension from the UK social security.
6 - I am a French civil servant working in the United Kingdom. Do I have to pay UK income tax on my French public remuneration?
The Article 19 of the French-UK income tax treaty provides that compensations paid by a contracting State to an individual, for services rendered in this State, be taxable only in this State, unless the services are rendered in the other State by a person who is a resident of and a national of this other State and not at the same time a national of the first-mentioned State.
Pursuant to these provisions, a French civil servant who is not a UK national does not pay UK income tax on the public remuneration he receives from France.
If you were subject to income tax the previous year, you will automatically receive an income tax return 2042 at the end of April.
Otherwise, you can download any forms from the following French Website: Download a tax return.
8 - When and where do I have to send my income tax return (2042)?
For the taxpayers residing in France, you will have to file your return in May of the year following that of the perception of the income. You have to mail your return to the tax center (centre des impôts) close to your domicile or to the tax center where you were taxed the previous year.
Note : in France, you do not compute the tax yourself when you file the return: the tax authorities does it for you. You do not have to mail any payment with the return. You will receive a tax bill at the end of the year.
For the taxpayers residing in the United Kingdom, the last day of filing for paper returns is 18 May 2016 and for online return 7 June 2016.
The paper tax returns must be mailed to the
Centre des Impôts des Particuliers des non-résidents
10, rue du Centre - TSA 10 010 - 93 465 Noisy-le Grand Cedex - FRANCE
Your mandatory payment along with the reference slip to be detached from the tax bill must be addressed to the "Trésor Public", and reach the service in charge of the recovery before the payment deadline.
If you do not have the possibility to send a check in Euros, you can write a check in UK pounds (the exchange rate will be used for the conversion of the pounds into Euros) to the order of "French Government" and mail it to the concerned service in France.
Income Tax: Alternatively, you can transfer the sum to the Trésorerie des non résidents bank account, mentioning your first name and surname, the reference number of the tax assessment notice, and the address of Banque de France.
Banking references of Service des Impôts des Particuliers des non-résidents are the following:
N° IBAN : FR76-3000-1000-6400-0000-9086-903
Agence Banque de France, 31 rue croix des petits champs, 75049 PARIS CEDEX 01
N° SWIFT : BDFEFRPP CCT
RIB : 30001-00064-64880000000-26
If you notice a taxation error, you can address a complaint to the tax center which established the taxation (the address of this center is on the tax bill). The deadline to file a complaint is:
for local taxes : December 31 of the year following the date of "mise en recouvrement" indicated on the assessment form ;
for other tax matters: December 31 of the second year following the date of "mise en recouvrement" indicated on the assessment form.
The owners must pay the "taxes foncières" whatever the use of the property (personal use or rental).
The "taxe d’habitation" is established in the name of the people who occupy or have the possession of a property. If the owner does not rent out the premise, he must pay this tax, even if he does not live regularly on the premise, as it is considered as a secondary residence.
The two taxes have to be paid by people who occupy or have the possession of the property on the 1° January of each year, even if they sell or they leave it during the same year. (In this matter the pro rata basis does not apply).
To convert a remuneration or a pension from Euros into pounds, you must use the conversion rate of the day of payment. The source of this conversion rate has to remain the same. You should be able to justified it with HMRC.
These forms, necessary to justify your residence abroad, have changed.
You now have to file the form 5000, possibly with one of its annexes:
5001 regarding dividends,
5002 regarding interests, or
5003 regarding royalties.
After having filled the forms, you must have them certified by your HMRC Local Tax Office. Once certified, you will mail the forms to the French paying establishment (your bank, for instance).
14 - I am considering purchasing a property in France. How much would I have to pay in stamp duties?
Existing buildings: deeds recording transfers of properties are submitted to the single registration formality. They are submitted to a departmental duty rate of 4.50%, a 1.20 % council duty and a 2.37 % collection service fee, which amount in total to 5.8%.
Building lands and newly built properties: purchases of such properties are liable to standard rated real property VAT (20% since the 1st January 2014)). However, purchases of building lands by private individuals in the purpose of building for dwelling are subjected to stamp duties. Sales of buildings are also liable to a reduced departmental duty rate of 0.70 %.
15 - I own a property in France. How are local taxes (Residence tax and real property tax) worked out?
Residence tax: this tax is due by any person who owns, rents or uses a furnished property. It is calculated by applying the rate set by local governments to the official Land Registry rental value. The residence tax is assessed on a yearly basis. The tax point is January 1st each year and the occupant at that time is liable for the tax. No rebate is granted if the property if the occupant moves out during the year. Non-residents cannot benefit from any base reduction or any relief.
Real property tax: This tax concerns lands and buildings and is assessed on a yearly basis. It is addressed to the person who owned the property on January 1st of each relevant year. New constructions benefit from a two year temporary exemption. The real property tax is also based on the official Land Registry rental value. No rebate is granted if the property is sold during the year.
WEALTH TAX AND CAPITAL GAINS
16 - I own a property and I hold a bank account and a few investments in France. Am I liable to wealth tax (ISF)?
Non-residents are only liable to ISF on assets they own in France. Moreover, their financial investments are expressly excluded from the basis of taxation: in order to encourage non-residents to keep or increase their financial investments in France, article 885 L of Code Général des Impôts exempts those investments from ISF.
Married couples and persons who have contracted a PACS (Civil Partnership) should file a joint tax return.
Are considered as French assets:
1. Tangible movable assets physically based in France;
2. Properties directly or indirectly owned in France, or actual rights relating to such properties;
3. Shares in French or foreign companies or legal persons, which assets are mainly (more than 50%) made of properties located in France, or rights relating to such properties, proportionally to the value of these assets compared to the global value of those of the company;
4. Shares in unlisted foreign companies or legal persons which headquarters are located outside of France and which assets are mainly made of properties located in France, or rights relating to such properties, proportionally to the value of these assets compared to the global value of those of the company;
5. Equity securities in a French legal entity (representing at least 10% of its share capital)
6. Debts, when the debtor is established in France and securities issued by the French State or by any legal entity which headquarters are in France, regardless of the composition of its assets.
The threshold of taxation is € 1,300,000. As a result, the ISF is not due when the value of the taxable assets is less than € 1,300,000 on January 1st 2016.
17 - On 1st January 2016, the total value of my French assets was equal to, or over € 1,300, 000. How is the wealth tax (ISF) worked out?
The ISF rates (2016), which are applied to the 1st € of the assets value, are the following:
Net taxable value of assets:
|not exceeding 800,000 € :||EXEMPT|
|between 800,000 € & 1,300,000 € :||0,50%|
|between 1,300,000 € & 2,570,000 € :||0,70%|
|between 2,570,000 € & 5,000,000 € :||1,00%|
|between 5,000,000 € & 10,000,000 € :||1,25%|
|over 10,000,000 € :||1,50%|
Declarative procedures are simplified (declaration 2042C on page 8 for taxpayers with assets < to 2,570,000 €).
Non-residents who are liable to ISF fulfilling these conditions will also be concerned by these simplifications if they also declare French sourced income on a 2042 tax return.
Otherwise, they will have to file a tax return n° 2725.
In that case, tax returns and payments should be sent altogether before 15th June 2016 to:
Service des Impôts des Particuliers Non-Résidents
10, rue du Centre - 93 465 Noisy-le Grand Cedex
18 - I am considering selling a property I have in France. What would be my tax obligations and how would the capital gain arising from the sale be assessed and taxed?
Sales made by non-residents are liable to capital gain tax (and, from 18 August 2012, to social contributions as well). The capital gain is worked out in the same way as for French nationals.
Capital gains made by non-residents on occasional sales of properties located in France are subject to a one-third withholding tax collected when the deed is submitted to registration duties.
A property owned in France by a French national who does not reside in France is considered as a main residence and is exempted from capital gain tax, on the basis of one residence per taxpayer. To qualify, the seller must have been resident in France for tax purposes during at least two tax years, must have had free access to the property since the 1st January preceding the year of the sale and must be the first sale of this kind since 2006. This same exemption is available to individuals who are nationals of other EU countries or to those of countries linked with France by an agreement against discrimination on the ground of nationality.
The capital gain is worked out in the same way as for French nationals.
Payment and filing
The one-third withholding tax is collected when the deed is submitted for registration (or failing that, within one month of the sale of the property) and when the tax return (2048-IMM) has been filed.
The non-resident seller is required to appoint a professional tax representative or an individual approved by the French Revenue. This representative should act as an agent and should be responsible for the filing of the tax return and for the payment of the relevant amount of tax on behalf of the seller.
a. Approved organizations of tax representatives:
ACCREDITECO, 9, rue Bouloi, 75001 Paris;
SARF, 2, rue des Petits-Pères, 75002 Paris;
Société Financière Accréditée, 41, avenue Montaigne, 75008 Paris;
Société Financière Accréditée, bureau de Nice, 3, Avenue Baquis, 06000 Nice;
SARF Azur, Aéropôle, 455, promenade des Anglais, 06200 Nice;
SARF Provence, 14 A, Boulevard Mirabeau, 13210 Saint-Rémy-de-Provence;
SARF Grabd Est, 16, quai Kléber, 67000 Strasbourg;
SARF Mont-Blanc, International Business Park, Europa 1, 74160 Archamps;
members of the "Chambre Syndicale des Généalogistes de France", 231, rue Saint-Honoré, 75001 Paris.
b. The obligation to appoint a tax representative may be waived by the French Revenue.
Double taxation issues in matter of death duties are ruled by the Agreement signed on 21st June 1963 between France and the UK.
a. When a deceased person was domiciled abroad, only the French assets are liable to inheritance tax in France. Taxable assets include properties, tangible assets, goodwills, and shares in French companies.
b. No inheritance tax is due on bonds issued by French companies, or the French Government or French local authorities.
c. When a deceased person was domiciled abroad and when the heirs are also domiciled abroad, foreign securities are not submitted to French inheritance tax.
- Allowances :
(clik on the file above for access to the chart)
There is a tax exemption for inheritance between brothers and sisters, when both the three following conditions are existing:
The brother or sister, must be, at the time when death occurs:
be single, widow, divorced or judicially separated ;
be over 50 or disabled in such a way that he or she cannot work so as to provide for his or her own needs ;
have constantly lived with the deceased during the 5 years before death.
inheritance between spouses or civil partners (PACS) is totally exempt from tax
- Rates :
(clik on the file above for access to the chart)