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Withholding Tax In France

If you’re new to France, or even already a tax resident in France for the last few years, the tax system may seem unfamiliar or confusing.

Understanding exactly what tax you have to pay when you become a resident of a new country is no easy task, especially in a country such as France, with multiple types of tax and stipulations to break down.

But, with a little expert guidance, you can easily discover which taxes matter to you and ensure you never fall on the wrong side of the law. At Elitax, we’ve spent almost two decades helping expatriates and new French residents get their head around the tax system — and our tax advisors are ready to help you, too.

So, below is some key guidance on taxes in France to familiarise yourself with French tax policies and be certain to meet deadlines and avoid penalty charges.  If you have any more questions or queries regarding tax payments in France, feel free to contact Elitax today.

How to calculate your tax in France

In France, income tax is levied on households, rather than individually.

French tax law is, in many ways, flexible to individual circumstances. For example: in the years of marriage, separation, or the death of a spouse, there are tax changes you must consider.

As a resident of France, an individual is subject to five main types of direct taxes:

  • Residence and TV tax
  • Real estate tax,
  • Business tax
  • Real estate wealth tax (from € 1,300,000)
  • Personal income tax

In France, income tax of year N is always paid in its entirety the following year. Up to 2018, there is no income tax withheld by employers, nor other institutions (pension funds, banks, financial institutions etc.).

At the submission of the yearly income tax return, the taxpayer declares the income earned during the preceding year, then the Tax Authority computes and calculates the income tax to pay. There are ways and means to reduce the final tax bill via aspects such as deductible charges, the income splitting system (quotient familial), considering the number of individuals in the tax household (single, married couple, spouses who have signed a civil law contract, number of dependents), the tax credits and, finally, the tax reductions.

What tax changes are coming to France in 2019?

However, income tax withholding will be introduced again in France in 2019 for the first time since its abolition in 1948. Consequently, during 2019, income tax of both the years 2018 and 2019 will be due by the taxpayers in France.

It is obvious that this would create huge financial pressure on the taxpayer. Therefore, the French Government has decided not to tax income earned during the year 2018, creating what it calls “L’année Blanche”, or the “White Year”.

So, good news for newcomers to France: 2018 is the year to come and work in France, as you will save one year of income tax! If you are moving to France from the new tax year starting April 6, for UK citizens, this will result in nine tax-free months. This opportunity will occur for the first time in 70 years and will surely not happen again in a lifetime! If you are thinking of moving to France or not, this is the year — and with the new laws on newcomers’ tax incentives, you can drastically reduce your income tax to pay for the next eight years after 2018.

Isn’t that an incredible opportunity to seize?

We here at Elitax would be very glad to help position you safely in the French tax system. Want to get started with our expert tax advisors? Call our Paris-based office on +33 (0)1 43 71 10 05, or send us a message today.

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