Global expatriate tax guide

Expatriate tax - France

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Expatriates taking up employment in France will be subject to comprehensive rules and in some cases employment visa requirements. Grant Thornton Société d’Avocats can help expatriates and their employers in dealing with the French tax and employment visa requirements, as well as with the French labour and social security issues.

In particular Grant Thornton Société d’Avocats can assist expatriates and their employers in identifying French tax planning opportunities, reviewing tax equalisation policies and providing compliance services regarding the French tax filing requirements.

Click on each of the areas below to expand for more information:

Facts and figures
Pre arrival procedures

The employers of non-EU nationals are usually required to apply for a work permit prior to the employee taking up employment in France. It is, therefore, important that the expatriate’s employment contract and benefit package is structured tax efficiently before the contract is submitted to the Department of Trade and Employment in France. A posting of the workers declaration must also be sent to the work inspectorate.

Employment visas

Under the work permit procedure, the employer will be required to advertise the position in France and the EU before the Department of Trade and Employment will consider issuing a work permit to a non-EU national if a suitable candidate cannot be found.

A residence visa must also be obtained for the expatriate to live in France. Where the expatriate’s spouse and family relocate to France, relevant visas and a separate work permits (where the spouse will also work) will be required. Where the expatriate is an EU national the above procedure is usually not required.

Tax year

The French tax year runs from 1 January to 31 December.

Tax returns and compliance

Individuals who are French residents for tax purposes must file their tax return before mid-May or the beginning of June for online filing when available.

Non-French residents for tax purposes must file before mid-May.

Payment of French tax

As from January 2019, a new « Pay-as-you-earn » tax system has been implemented in France. It is now mandatory to report bank details for a SEPA bank account when filing the annual tax return. Income tax is withheld directly from payslips.

However, monthly or quarterly (upon option) instalments are withheld directly from the taxpayer bank account for other income, such as rental income, and self-employed income.

Income tax rates

The global taxable income is divided within the household in a number of equal parts (e.g. one part for a single person, two parts for a married couple, 0.5 part for each of the first two dependent children, one part from the third child). Next, the progressive tax scale is applied on the taxable income per part obtained. Lastly, the partial tax is multiplied by the number of parts, determining the payable gross tax.

Please note that progressive income rates apply subject to specific rates detailed below.

As from January 2019, for every employee, relevant tax rate will be communicated by the tax authorities to employers on a monthly basis in order to withhold income tax on payslips.

The taxpayer may choose to keep his/her rate confidential. In this case, no communication of actual rate will be made by the tax authorities to the employer, and a neutral rate will be applied to the net taxable salary. Please note that the neutral rate is a rate computed based on the situation of a single taxpayer with only professional income.

Finally, a couple may choose to individualize its tax rate. It basically means that each taxpayer will be applied a rate proportional to his/her income rather that the rate of the household.

Portion of taxable income for one part (€) Rate (%)
Up to 10,064 0
From 10,064 to 27,794 14
From 27,794 to 74,517 30
From 74,517 to 157,806 41
Above 157,806 45
Exceptional contribution on high income (based on the reference tax income) Single taxpayers % Couples %
From €250,001 to €500,000 3 0
From €500,001 to €1,000,000 4 3
Above €1,000,000 4 4
Sample income tax calculation

Sample income tax calculation (for a single taxpayer)

Employment Income:
Net salary 60,000
Net car benefit (mileage driven during year 5,250
Net car fuel benefit 2,850
Total taxable income 68,100
Less allowance of 10% for expenses  (6,810)
Net taxable salary 61,290
Personal income  
Dividend from French company 3,000
French bank interest 500
Net taxable income liable to progressive rate 61,290
Net taxable income for flat rate (12.8%) 3,500
Income tax thereon: (27,794 -10,064) @ 14% 2,482
(61,290-27, 794) @ 30% 10,049
Flat tax rate on investment income @ 12.8% 448
Total tax 12,979
Less allowance of 50% for household employee (3,500)
Residual liability 9,479
Social contributions (3500 @ 17.2%) 602
Total 10,081

 

Basis of taxation
Charge to tax

A charge to French tax is dependent on whether the income arises in France. The extent of the charge will be determined by an individual’s tax residency status.

Residence

Taxation of individuals in France is determined by their residency or the source of their earnings. Persons are resident in France for French tax purposes if:

  • they have their home or permanent place of abode in France
  • they carry on a professional activity in France unless this activity is carried out incidentally
  • they have the centre of their economic interests in France.

French residents are taxed on their worldwide income and gains. Non-residents are only taxed on their French source income and gains.

Income from employment

A French tax charge arises on employment income derived from duties performed in France. Assessable employment income includes all wages, salaries, overtime pay, bonuses, gratuities, perquisites, and benefits etc.

Source of employment

As mentioned above, where duties are performed in France, any remuneration received in respect of these duties is treated as French sourced income and, therefore, is subject to French income tax regardless of the expatriate’s tax residence status (subject to a relevant double taxation treaty).

Benefit in kind

In general, where the benefit is enjoyed in France, a French income tax charge will arise. Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to French income tax in addition to the individual’s salary.

Expatriate concessions

A tax exemption on the allowances paid to employees seconded to France, workdays spent out of France and 50% of foreign source passive income has been implemented under specific conditions.

Relief for foreign taxes

Where income has been subject to double taxation (in France and a foreign jurisdiction) relief can be granted where provided for in the relevant double taxation treaty.

Deductions from taxable income

France grants a wide range of tax deductions.

French resident taxpayers are entitled to deduct a 10% personal allowance on salaries and pensions for deemed expenses – capped to €12,502 in 2018. They may also be entitled to the following as allowances: child tax credit, education, sitter, alimony, employment of a servant, gifts in favour of specific organisations and interest paid for the acquisition of certain real estate.
Some non-resident individuals may also be entitled to allowances to offset against French source taxable income.

Other taxes
Capital gains tax

Tax on capital gains on shares
Capital gains on shares realised as from 1 January 2018 are taxable at the flat 12,8% rate applicable to the investment income.

Alternatively, the taxpayer may opt for the application of the progressive tax rate for the taxation of capital gains. The former tax rebates are applicable only to shares acquired prior to January 1st, 2018. These rebates apply at a 50% rate after the 2nd year of ownership, and 65% after the 8th year of ownership. An incentive regime entitles taxpayers to benefit from better rebates for length of ownership that can apply at a 50% rate after the 1st year, 65% after the 4th year and up to 85% after the 8th year, subject to conditions.

The option for the application of the progressive rate is “global” meaning that it applies to all investment income taxable in the same year.

Tax on capital gains on real estate
For calculating the taxable capital gain, a tax allowance per year of ownership is available after the fifth year of ownership, which grants a tax exemption from capital gains after 22 years of ownership and social contributions exemption after 30 years of ownership.

This tax rebate is computed differently for income tax and social taxes.

For income tax:

Length of ownership Tax rebate applicable / year
0 to 5years 0%
6 to 21 years 6%
22 and more 4%

For social tax:

Length of ownership Tax rebate applicable / year
0 to 5years 0%
6 to 21 years 1.65%
22 years 1.60%
23 and more 9%

Some exemptions are available for principal residence.

A flat tax rate of 19% applies for the capital gains realised on real estate by individuals, resident in France (plus specific social levies), within the EU or in one of the EEA (Liechtenstein excluded) member countries. For other individuals, tax is levied at 31% (a 75% rate applies for individuals who are residents in a non-cooperative country or territory).

A surtax varying between 2% and 6% of the net taxable gain applies if it exceeds €50,000.

Inheritance, estate, and gift taxes

A liability to French inheritance and gift tax depends not only on the French tax residency status of the deceased/donor and of the beneficiary, but also on the location of real estate and assets when the deceased/donor is not a resident in France. The rates vary depending on the degree of kinship between the deceased/donor and the beneficiary.

Investment income

The expatriate’s French tax residency status will determine whether investment income such as interest, dividends etc., will become liable to French income tax.

As from 1 January 2018, interests and dividends are liable to 'flat tax' (12.8% of income tax + 17.2 % of social taxes). Alternatively, the taxpayer may opt for the application of progressive rate for this investment. As mentioned above for capital gains, this option applies globally for every investment income and capital gains on shares.

Local taxes

There are local taxes (dwelling tax, tax on built properties, or non-built properties) to which an individual is liable in France.

Real estate tax

See 'capital gain tax' above for taxation of gain upon selling.

Real estate is also subject to annual property tax, usually paid in October.

Social security taxes

Social security as of 1 January 2019

‘National insurance contributions’

Executive (not contracted out) Employee Employer
Health, maternity, disability, death - 13% or 7%
total earnings
Autonomy solidarity contribution (Contribution solidarité autonomie/ CSA) - 0.3%
(total earnings)
Old-age insurance (with upper limit) 6.9%
(€3,377)
8.55%
(€3,377)
Old-age insurance 0.4%
(total earnings)
1.9%
(total earnings)
Accidents at work (varies based on company size and risks) - variable based on company size and risks
(total earnings)
Family benefits - 5.25% or 3.45%
(total earnings)
Social security surcharge (Contribution sociale généralisée / CSG) 9.2%
(98.25% of gross salary)
-
Social security debt reimbursement contribution (Contribution pour le remboursement de la dette sociale / CRDS) 0.5%
(98.25% of gross salary)
-
Unemployment - 4.05%
(€13,508)
AGS - 0.15%
(€13,508)
Supplementary pensions (Agirc-Arrco scheme)
Bracket 1 3.15%
(€3,377)
4.72%
(€3,377)
CEG (Overall balance contribution) 0.86%
(€3,377)
1.29%
(€3,377)
Bracket 2 8.64%
(from €3,377 to €27,016)
12.95%
(from €3,377 to €27,016)
CEG 1.08%
(from €3,377 to €27,016)
1.62%
(from €3,377 to €27,016)

Also:
• non-executive
• self employed
• unemployed.

Specific social levies
French residents are also subject to 17.2% social contributions on their investment income (eg rental income, capital gains, as well as on their fixed interests’ securities and dividends) including:

  • 9.2 % contribution (called CSG)
  • 0.5% contribution (called CRDS)
  • 7.5% social levies (“prélèvement de solidarité »).

Part of the CSG (6.8%) is deductible from the taxable income the year after payment of the contribution. Non-residents are also subject to social contributions at a 17.2% rate on their rental income and real estate capital gains.

Stock options

For stock options and free shares granted before 28 September 2012, the advantages of such schemes are taxed as part of employment income at the progressive rates, unless they qualify for specific tax and legal regime providing for:

  • a taxation at flat rates of 18%, 30% or 41% of the profit deriving from the exercise of option (difference between exercise price and market value at the date of exercise)
  • a taxation at a flat rate of 30% on the market value of the shares at the time they are freely given for shares incentives plans implemented as from 1 January 2005.

For options and free shares granted as from 16 October 2007, an employee special social security contribution applies.

Tax is levied at the time of the sale of shares except the employer special social security contribution, which is levied at the time of the grant of shares.

Capital gains in excess are treated as capital gains on shares.

Stock options granted as from 28 September 2012 are taxed as salary and thus liable to progressive tax rate.

Free shares granted as of 28 September 2012 and before August 8th, 2015 are taxed as salary and thus applicable to progressive tax rate.

The following regimes only apply to free shares:

1. Free shares granted as of 8 August 2015 and until 30 December 2016 are taxed as part of the taxable income at progressive income tax rates and liable to social taxes attributable to capital.

2. Free shares granted as of 31 December 2016 and until 31 December 2017 are taxed as follows:

  • gain up to € 300,000 is taxed at progressive rates after application of rebate for length of ownership
  • gain above this ceiling is taxed as salary without benefiting from any tax rebates.

3. Free shares granted as from 1 January 2018 are taxed as follows:

  • gain up to € 300,000 is taxed at progressive rates after application of 50% tax rebate or a fixed tax rebate for company owner retiring.
  • gain above this ceiling is taxed as salary without benefiting from any tax rebates.
Wealth tax

As from January 2018, the former wealth tax (Impôt sur la fortune) is replaced by a wealth tax based on real estate assets only (Impôt sur la fortune immobilière). French tax residents are taxable on their worldwide income (double taxation may be avoided through double tax treaties).

Fraction of net taxable value of assets (€) Rates
Up to 800,000 0%
800,001-1,300,000 0.5%
1,300,001-2,570,000 0.7%
2,570,001-5,000,000 1%
5,000,001-10,000,000 1.25%
Above 10,000,000 1.5%
Other specific taxes

There are no other specific taxes relating to expatriates in France.

Tax planning opportunities
Earnings description Planning possible
Base salary Y
Bonus Y
Cost of living allowance Y
Housing Y
Home leave Y
Club membership N
Moving expenses Y
Foreign service premiums Y
Education/schooling Y

 

Prepared based on the legislation and rates available as of 15 December 2019.

For further information on expatriate tax services in France please contact:

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Anne Frede
E afrede@avocats-gt.com