If you meet any of these criteria you are liable to
pay French taxes on your worldwide income. This article
is an introduction to the primary taxes you are likely
to pay in France.
There are four forms of tax on income and gains:
1. Income tax on earnings, rental income, pensions
and some investment income. This is applied on scale
rates, with the highest rate being a hefty 48.09%.
2. Other types of income have fixed rates, such as
15% at source on bond or bank interest and 16% on certain
capital gains such as from shares or funds.
3. Social charges, totalling 8%; 10% (on investment
income) or 6.7% (on pensions). Part of these charges
can be deductible when calculating the tax due on your
income charged at the scale rates.
4. Health contributions, which are 8% over a threshold.
Income tax
French income tax is assessed on the total income of
the household. If your family earns a high income you
can divide it into a number of parts. Your total income
is then divided by this number of parts and the income
tax scale rates applied to this lower figure. Once the
tax is calculated, it is multiplied by the number of
parts to provide a larger number. This will lower your
tax rate, but make sure your tax adviser or accountant
understands the system and applies it to your best advantage.
There are allowances for anyone over the age of 65,
whether or not you are retired. If your income is under
?10,130 your allowance will be ?1,646; if it is between
?10,130 and ?16,370, it is ?823.
You are also entitled to a tax credit if you have installed
heavy equipment in your home, such as central heating,
lifts or cesspits.
Pensions
If your pension arises from UK government service (excluding
the NHS) it remains liable to UK tax (and not French
tax). This can be avoided if you transfer out before
the pension commences, and usually before age 59.
Company pension schemes are taxed in the same manner
as salaries.
Purchased annuities are taxed differently (and more
favourably). It is generally accepted that: lump sums
as commutation of pension rights are tax free; annuities
should be taxed as pensions, not purchased annuities,
if they are paid directly or indirectly out of a pension
fund accumulated during your professional working life;
purchased annuities are liable to French wealth tax.
This, however, has not been put in writing, and you
should seek advice from an international pensions specialist.
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