In France, almost any activity other than unfurnished lettings constitutes a business. As such, as an individual, even if you are not running a business, you may be subject to business tax.
Furthermore, the tax base calculation depends on whether you are French resident or not.
If you are a French resident, income tax (called Impôt sur le Revenu des Personnes Physiques - IRPP) applies to your worldwide income (salaries, pensions, trading income, investment income, rental income, etc.). If you are not a French resident, it applies only to your French-source income.
You will be considered a French resident if:
- Your family home (foyer) is in France;
- or you have your principal place of stay in France. This includes:
- Spending more than 183 days in France in a given calendar year;
- or spending less than 183 days in France but you have moved to a permanent home in France;
- or being a tax resident of no other country and making regular, substantial visits to France, but not necessarily more than 183 days in a given calendar year
- or you work in France - employed or self-employed and it is your main activity;
- or you have your centre of economic interest in France.
As tax residence rules differ from other countries, there are cases where you may end-up being dual resident. Double tax treaties between France and other countries in most cases ensure that the incidence of double taxation is mitigated by giving credit for taxes paid in one state against those in the other. But the application of those treaties is not applied in the same way in each country.
Rates of the income tax
The minimum income tax rate for non-residents is 20%.
French residents are subject to different rates which are applied on a sliced part basis (each part of their income is charged on a progressive basis). However, there are also various allowances for different types of household, eg widows, disabled, elderly, dependent children.
According to the last Loi de Finances rectificative, the rates which will be applied in 2012, are:
- Up to 6,088 €: 0%
- Between 6,088 € and 12,146 €: 5,50%
- Between 12,146 € and 26,975 €: 14,00%
- Between 26,975 € and 72,317 €: 30,00%
- Above 72,317 €: 41,00%
The taxable income to be assessed is the total income of the household. However, when thre is more than one household member, the family is divided into a number of parts familiales. As such, the total income is divided by the number of parts. The income tax scale rates are then applied to this lower figure, and having computed the income tax due, it is multiplied back up by the number of parts.
Declaration and tax payments
When a person becomes a tax resident, it is their responsibility to make themselves known to the French tax authorities and to fully declare their income, capital gains and wealth. Married couples or couples allied under a PACS complete joint tax returns.
Income tax is paid in the year after the income is earned. So for 2011 income the tax is paid in 2012. The tax can be paid either in three equal instalments or by ten monthly instalments from January to October. The normal tax return filing deadline is 31 May following the end of the tax year (but this can be extended in certain circumstances - please check the exact date at the French Tax office).