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By law, the due date is 1 March but in recent years the tax administration has extended the date to mid-May May 18 for the declaration of the income. Extended deadlines exist for internet filing. In France the income tax return is generally a family return with spouses and dependent children reporting their income jointly. Married couples are required to file jointly - exceptions are allowed only under very limited circumstances. Single, divorced, and widowed taxpayers are also required to file a family return including their dependents.

In certain cases, major children can be claimed as dependents: France uses an income-splitting system to determine the applicable tax rate — therefore, the larger the family size, the lower the income tax. Income taxes for residents are payable in the year after the income is earned. The final payment is due on 15 September after the actual assessment is received. The French tax authorities will automatically refund without action required from tax payer any excess payment if the 2 or 10 installments are higher than the final income tax assessed.

Income tax for the initial year of residence in France is usually not due until the 15 September of the year following arrival, since no February or May estimated payments are required. The payment should be made on the French tax authorithy website through a SEPA bank account for the payment over Euros 2 If not a penalty of 0.

The taxpayer and spouse, if applicable, are required to file a joint French tax declaration reporting total taxable income received by the family unit spouses plus dependent children in the previous calendar year with their local tax office by the deadline in the year following the tax year.

No payment of tax is due with the declaration.

Employer income tax withholding is required when a non-resident receives compensation that is taxable in France, and a monthly withholding tax return must be filed by the employer. This income is subject to progressive income tax withholding rates of 0 percent, 12 percent, and 20 percent depending on the amount of total taxable compensation. When compensation reaches the 20 percent bracket, an annual individual non-resident income tax return is also required even though tax has been withheld at source.

Similarly, if a non-resident receives taxable French-source income other than compensation, then an annual non-resident return must be filed. The taxpayer and spouse, if applicable, are required to file a joint French non-resident tax declaration by May 18 for income and if the taxpayer filed his return via paper In fact even if the official deadline is March 1st, extension is usually granted by French tax administration until mid-May.

Extension of the deadline is possible when filing online. In France, income taxes are calculated using a progressive rate scale. The finance law for confirmed the below rates and brackets applicable to income. The contribution will be repealed as soon as the deficit target of 3 percent is reached. For compensation, the income tax withholding rates for non-residents are 0, 12 and 20 percent, depending on the amount of net compensation, as outlined below.

The tax may, in some cases, be final. When compensation reaches the 20 percent bracket, an annual individual non-resident income tax return is also required even though tax has been withheld at the source.

When an annual non-resident return is required for either French-source compensation income or other French-source income, this income is subject to the same progressive tax rates outlined above or a flat rate of 20 percent, whichever of the two is higher. The maximum marginal tax rate on the graduated rate scale applicable to income is 45 percent, reached at EUR EUR , of taxable income for a single taxpayer; this amount is doubled for married taxpayers and increases according to family size.

The computation of income tax is quite complex. The total net income of the taxpayer must be determined and divided by a coefficient corresponding to the marital status and number of dependents in order to arrive at the net taxable income per part. The income tax table is then applied to the result and the income tax thus computed is subsequently multiplied by the same coefficient to arrive at the gross tax burden.

If however the net taxable income exceeds a certain ceiling, the benefit from additional dependents is gradually reduced so that a high earning taxpayer does not receive the full benefit of the coefficient system. The coefficient system takes into account the taxpayer's marital status and the number of dependent children. In addition to the progressive income tax rates, , supplemental direct taxes are applied to interest, dividends and rental income and capital gains taxes are as follows:. Domicile does not refer to the Anglo-Saxon term, but is a term used in French tax law.

It is roughly equivalent to the term residence in most jurisdictions. The criteria for determining domicile are very broad. An individual will be considered domiciled in France for tax purposes in any one of the following circumstances, subject to tax treaty provisions:. Is there, a de minimus number of days rule when it comes to residency start and end date?

The final year tax declaration should be filed by the normal filing deadline in the subsequent calendar year, and it should include all income earned during the period of residence in France, as well as French-sourced income earned after departure from France during the same tax year.

Income tax related to the final year should be paid within the same time frame as for a resident of France. French tax residents who transfer their tax residences abroad after having been French tax residents for at least six years at the time of the transfer, will be subject to a new exit tax.

The taxable basis will be the unrealized capital gain as valued on the day preceding the date of departure.

France - Corporate withholding taxes

Do the immigration authorities in France provide information to the local taxation authorities regarding when a person enters or leaves France? Immigration officials do occasionally ask for information from the tax authorities, especially when renewing visas. Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

Do the taxation authorities in France adopt the economic employer approach 1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in France considering the adoption of this interpretation of economic employer in the future?

Historically, no, the position of the French tax administration has been to look at the legal employer. However, there is a trend towards taking the economic employer approach where there is a recharge of the remuneration costs to the French entity. Are there a de minimus number of days 2 before the local taxation authorities will apply the economic employer approach?

If yes, what is the de minimus number of days? What categories are subject to income tax in general situations?

Residents of France are subject to tax on their worldwide income, for example: Are there any areas of income that are exempt from taxation in France? If so, please provide a general definition of these areas.

Double taxation treaties may provide exemption from French tax on certain items taxable elsewhere; for example, compensation for services rendered and paid in a treaty country, or rental income on property situated in a treaty country.

The economic modernization law contained noticeable changes to the specific tax regime applicable to inbound assignees impatriates , which was initially introduced in with the stated aim of making France more attractive to foreign talents. The impatriate regime covers employees sent to France by a non-French employer to perform professional duties for a limited period of time, provided that the impatriate takes up French tax residence and has not been a French tax resident during the five calendar year period preceding the start of the assignment.

People directly recruited abroad by a French employer and self-employed individuals are brought within the scope of the regime if arrived before December 21, Exemption from income tax is provided to the end of the fifth year following arrival for the portion of the salary compensating for the transfer to France impatriation premium and the the portion paid specifically for duties performed outside of France but for the benefit of the French host company.

For assignement beginning after July 6th, , this exemption is now provided to end on the eighth year following arrival. There is a global exemption limit: However; if this option proves to be more favorable, the employee may chose to have the total impatriation premium fully exempt from tax but with a limit on the salary paid for duties performed abroad of 20 percent of the net taxable salary. For employees hired directly from abroad by a French entity, and for self-employed individuals, the income tax exemption will generally be a flat 30 percent of the remuneration.

Under the impatriate regime, passive investment income such as interest and dividends , capital gains from the sale of securities, copyrights and royalties received from a country with which France has entered into a double tax agreement including a mutual assistance clause, are only liable to income tax on half of the amount.

Impatriates are also exempt from French wealth tax on their assets held outside France for the first five years, whatever the reason for their arrival in France, provided they have been outside of France for over 5 calendar years. Employees of headquarters entities that have obtained a special ruling may exclude from their French taxable income employer reimbursements for additional housing over home country costs, school tuition, home leave and tax protection or equalization.

In this case the excluded amounts are subject to corporate French tax at a negotiated rate. Nonetheless, a major benefit is the elimination of the tax-on-tax snowball effect at the individual level. If none of the above exemptions apply impatriates or Headquarters individuals expatriates who were not resident in the fiscal year immediately before the year of arrival and whose assignment is not expected to last more than six years may exclude from taxable compensation the following payments:.

Taxable salary of residents cannot be reduced by allocating income to foreign business trips. However, there are a number of exclusions:. To qualify, this premium should be paid in addition to the usual salary and should be provided for in writing prior to claiming the exemption. It should be calculated by reference to the number of business trips actually made that is time spent working abroad. The amount should be reasonable in relation to normal salary and in any case may not exceed 40 percent of daily taxable remuneration per day spent abroad.

While exempt from income tax, such indemnities are taken into account for exemption with progression and subject to French social charges, if applicable. In general, investment income, including dividends and interest, is taxed at ordinary progressive tax rates, subject to tax treaty provisions. Rental income is taxable at the normal progressive rates, though different rules apply depending on whether the property is rented furnished or unfurnished.

For unfurnished rentals, a default regime exists to allow a deduction of 30 percent of gross receipts.

France's new tax diminshes advantages of stock plans in employee compensation - Lexology

Alternatively, it is possible to deduct actual expenses including interest, local property taxes, and other related expenses. Generally, rental losses from unfurnished properties of up to EUR10,, excluding interest expenses, may be deducted from other income in the current year. Rental losses from unfurnished properties in excess of this amount and that portion of rental losses created by interest expenses may be carried forward and applied against rental income of the following 10 years.

Income from furnished rentals is taxed as business income and different rules apply. For qualified plans, taxation takes place at the sale of the shares. A social security tax exemption is applied to the acquisition gain if a holding period from option grant to the sale of the shares of 4 years is met options granted as of 27 April If, in addition to the above period an additional holding period of two years from option exercise to the sale of the shares is met, the more favorable capital gains' tax rate applies on the portion of the acquisition gain not exceeding EUR, A social security tax exemption is applied subject to duly notification to French social authorities to the acquisition gain if a holding period from option grant to the sale of the shares of 4 years is met options granted as September 29 For non-qualified plans, taxation takes place at exercise and the acquisition gain is treated as salary for income tax and social security purposes.

A new withholding tax has been imposed on the gains of non-residents on the French source portion of the gain, whether the plan is qualified or not. Capital gains on the sale of real property located in France are generally taxable whether or not the owner is domiciled in France. A gain resulting from the sale of real estate for gross proceeds of up to EUR15, is exempt from French tax and if the property was held for 23 years or more.

No deduction is allowed for losses arising from the sale of real property in France. Capital losses on the sale of securities can be deducted from capital gains of the same nature in the same year or carried forward and set off against future gains for up to 10 years.

GiftsGifts are, in principle, not subject to capital gains tax in France. However, gift tax could be applicable.

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Gifts are, in principle, not subject to capital gains tax in France. As taxes are paid one year in arrears in France, the one-year rollover method is most generally used for tax reimbursements. In the year of departure, all income paid and earned for the period from 1st January to the departure date should be reported. A current year gross-up calculation should generally be performed if the tax reimbursement is not exempt under the expatriate regime.

Income tax differentials resulting from tax equalization or tax protection are fully taxable in France, unless the assignee falls under the specific tax regime for impatriates. For example, pay-as-you-earn PAYE , pay-as-you-go PAYG , etc. Resident taxpayers generally pay their taxes in the year after the income is earned. The final payment depends on when the assessment is issued but generally this will be on 15 September.

As there is no withholding of income tax in France, it is prudent to set aside money for taxes. There is no pay-as-you-go withholding in France for resident taxpayers.

However the French government is actually is preparing to implement a pay-as you —go withholding in France fro French tax resident from year onwards. Any additional tax due is payable when assessed. Income tax for the initial year of residence in France is usually not due until 15 September of the year following arrival, since no February or May estimated payments are required. Is there any Relief for Foreign Taxes in France?

For example, a foreign tax credit FTC system, double taxation treaties, etc? France has a broad network of income tax treaties, some of which also cover wealth taxes. Beneficiaries of income tax treaties may be exempt from French income tax on certain income, but such exempt income must nevertheless be reported on the tax declaration and is taken into account in determining the tax rate to be applied to the non-exempt income that is exemption with progression.

Income exempted under treaties concluded by France often includes salaries paid from abroad for services actually rendered abroad, income from the rental of foreign real estate, and income from a foreign business.

Foreign tax credits are often available under treaties with respect to taxes paid at source on foreign dividends, interest, and royalties. Under this treaty, American citizens who are tax residents of France must declare their worldwide income in France but are entitled to a tax credit in respect of most U. Please note that these provisions apply to U. In the absence of an income tax treaty, internal relief for double taxation may be available to French tax residents working abroad for a French or other EU employer, or for an employer situated in a country that has signed a tax treaty with France containing an administrative clause, provided the foreign tax paid represents at least two-thirds of the tax that would have been charged in France.

The exempt income must nevertheless be reported on the tax declaration and is taken into account in determining the tax rate to be applied to the non-exempt income that is exemption with progression. This calculation assumes a married taxpayer resident in France with two children who is on assignment that begins 1 January and ends 31 December The rates are now available and have been applaied for year calculation.

The rates will be voted late in the year. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than days in the fiscal year or, a calendar year of a month period , the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the economic employer and therefore the employer for the purposes of interpreting Article In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

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Register Login Learn more Dashboard Library About MyKPMG Interests Profile Logout. Global English Select KPMG member firm site and language Global English View all KPMG sites and languages. France - Income Tax France - Income Tax Taxation of international executives. Tax returns and compliance When are tax returns due? That is, what is the tax return due date? What is the tax year-end? What are the compliance requirements for tax returns in France? Residents The taxpayer and spouse, if applicable, are required to file a joint French tax declaration reporting total taxable income received by the family unit spouses plus dependent children in the previous calendar year with their local tax office by the deadline in the year following the tax year.

Non-residents Non-residents are subject to income tax in France on their French-source income only. Tax Rates What are the current income tax rates for residents and non-residents in France?

In France, rates are voted at the end of the year for the year gone by. Non-residents For compensation, the income tax withholding rates for non-residents are 0, 12 and 20 percent, depending on the amount of net compensation, as outlined below. Table of coefficients Status Coefficient Single, divorced, or widowed persons with no dependents 1. RESIDENCE RULES For the purposes of taxation, how is an individual defined as a resident of France?

An individual will be considered domiciled in France for tax purposes in any one of the following circumstances, subject to tax treaty provisions: When an individual spends more than days in a year in France, residence is presumed. What if the assignee enters the country before their assignment begins? What if the assignee comes back for a trip after residency has terminated?

Communication between immigration and taxation authorities Do the immigration authorities in France provide information to the local taxation authorities regarding when a person enters or leaves France? Filing requirements Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

ECONOMIC EMPLOYER APPROACH Do the taxation authorities in France adopt the economic employer approach 1 to interpreting Article 15 of the OECD treaty? De minimus number of days Are there a de minimus number of days 2 before the local taxation authorities will apply the economic employer approach?

Earned income including salary, wages, bonuses, allowances, etc.. Under certain conditions, assignment-related allowances may be exempt in France.

Fringe benefits are taxable as employment income, generally at their actual value. Taxable fringe benefits include such items as a car, meals, housing, and the payment of utilities bills by the employer. Special valuation methods exist for housing and private use of company cars.

Non-commercial activities such as activities performed by individuals in the legal and medical profession. Dividends, although at reduced amounts, interest are included on the tax returns and taxed according to the graduated rate scale or flat rate taxation at the option of the taxpayer. Net rental income is taxed at normal progressive rates. Rental losses up to EUR10, excluding mortgage interestexpenses may be deducted from other income Capital gains on securities are taxable irrespective of the amounts of gross proceeds.

In addition, since income, gains are taxed at the marginal rate of the taxpayer for personal income tax plus plus If net losses result, they may be carried forward for 10 years for use against subsequent capital gains of a similar nature. Capital gains on real estate and personal property are taxed differently. A rebate is also applicable after two years of detention of the shares.

TAX-EXEMPT INCOME Are there any areas of income that are exempt from taxation in France? The following categories of income are exempt from income tax: Most moving and temporary living expense reimbursements are generally not taxable and lump sum relocation allowances for unsubstantiated expenses may be tax free if it can be demonstrated that the amount was actually spent in connection with items that would normally be reimbursed free of tax income from certain bank accounts: Are there any concessions made for expatriates in France?

If none of the above exemptions apply impatriates or Headquarters individuals expatriates who were not resident in the fiscal year immediately before the year of arrival and whose assignment is not expected to last more than six years may exclude from taxable compensation the following payments: SALARY EARNED FROM WORKING ABROAD Is salary earned from working abroad taxed in France?

However, there are a number of exclusions: Are investment income and capital gains taxed in France? Capital gains from the sale of securities are taxed applying the French profgressive rates and brackets.

Capital gains, and also other investment income, including rental income, are subject to additional surtaxes of The surtaxes are assessed via the same tax bill as the French personal income tax. The gain generated from the sale of a principal residence is free of tax. For other properties, resident French taxpayers are taxed at 19 percent plus Some rabate can be applied depending of the number of years of detention of the property.

Non-resident taxpayers leaving outside of the EU are taxed at These special conditions and exemptions also apply to citizens from other countries that have a double taxation treaty with France that contains a non-discrimination clause. Unique and favorable provisions exist in the French-U. Dividends, interest, and rental income Dividends received since January 1st, , are subject to the following taxes and levies: This withholding is considered to be a pre-payment of income tax to be deducted from the final tax liability, and refundable if applicable.

However, this last provision above does not apply to households whose previous year reference income is less than EUR 50, single taxpayers, divorced or widowed or EUR 75, taxpayers filing jointly. Interests received since January 1st, , are subject to the following taxes and levies: The interests are taxed according to the graduated ordinary income tax rates. However, this last provision above does not apply to householdswhose previous year reference income is less than EUR 25, single taxpayers, divorced or widowed or EUR 50, taxpayers filing jointly.

Non-qualified plans For non-qualified plans, taxation takes place at exercise and the acquisition gain is treated as salary for income tax and social security purposes Non qualified RSUs are taxable at delivery of the shares. Principal residence gains and losses Capital gains on the sale of real property located in France are generally taxable whether or not the owner is domiciled in France. Capital losses Capital losses on the sale of securities can be deducted from capital gains of the same nature in the same year or carried forward and set off against future gains for up to 10 years.

Gifts Gifts are, in principle, not subject to capital gains tax in France. If so, please discuss? Are there capital gains tax exceptions in France? Pre-CGT assets Not applicable. Deemed disposal and acquisition Not applicable. The following items of expenditure may be deducted from taxable income. Employee social security contributions are generally deductible from gross employment income. Compulsory pension contributions and a portion of the CSG surtax are deductible from taxable employment income, within certain limits.

Mandatory employee social security contributions paid to the home country scheme are generally deductible for income tax purposes. A standard 10 percent deduction to account for professional expenses limited to EUR 12, on income is applied to the employment income of each member of the household. Actual professional expenses may be claimed instead, without limitation, as long as they can be justified. The 10 percent deduction applied to pensions is limited to EUR 3, per household on income.

Deductions are allowed for alimony made pursuant to a court order and child support payments for minor children that are not part of the fiscal household of the taxpayer. Deductions of child support payments are allowed for children over 18 if the children need parental support such as a student provided the children are not part of the fiscal household of the taxpayer; however this deduction is limited to EUR 5, per child for tax year Such payments would generally constitute taxable income in the hands of the recipients.

Cost of supporting a person over 75 years of age in the taxpayer's home. Rental losses from unfurnished properties up to EUR10, Losses from the exercise of a business or independent professional activity. Contributions to qualified supplementary retirement plans, PERP, PERCO, or contributions made to a plan under the Loi Madelin are deductible from income within certain limits. Pay-as-you-go PAYG withholding There is no pay-as-you-go withholding in France for resident taxpayers.

For example, monthly, annually, both, etc. RELIEF FOR FOREIGN TAXES Is there any Relief for Foreign Taxes in France? GENERAL TAX CREDITS What are the general tax credits that may be claimed in your country? Several credits may be claimed against the taxpayer's tax liability, for example: For residents of France, a tax credit may be claimed for each dependent member of the household at the level of college, lycee, or university.

The credits are EUR 61, EUR , and EUR , respectively. A credit of 75 percent of qualifying charitable donations of up to EUR is available, for donations that have been made to organizations that provide food, shelter or medical care to people in need. A further credit of 66 percent of additional charitable contributions is available, to the extent that total donations do not exceed 20 percent of taxable income. A tax credit of 50 percent of the expense of a domestic employee salary and related social charges paid by the taxpayer is available to resident taxpayers.

The credit may not exceed EUR 6,, except in certain situations. This limit is increased by EUR per dependent child. A domestic employee is defined as one who works in the home, providing, for example, child care, housecleaning, gardening, tutoring, or other services.

Residential insulation energy expenditure: Tax credits are allowed to homeowners or renters who undertake qualified expenses related to home insulation or installing energy efficient equipement. A tax credit is available to taxpayers for child care expenses for children under six years of age outside of the home. The credit is 50 percent of the expense, limited to EUR2, per child thus a maximum credit of EUR1, per child. Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.

The company car is used for business and private purposes and originally cost USD50, The employee is deemed resident throughout the assignment.

Tax treaties and totalization agreements are ignored for the purpose of this calculation. The impact of the impatriate regime with regards to passive income has been ignored.

Other assumptions All earned income is attributable to local sources. Connect with us Find office locations kpmg. KPMG's new digital platform KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.

By using this website, you agree to the use of cookies as outlined in KPMG's online privacy statement. Single, divorced, or widowed persons with 1 dependent the coefficient is 2 if the taxpayer does not live as if married with another adult.

Married or widowed persons with 1 dependent; single or divorced persons with 2 dependents.