Income tax in France (2015 rates)
Further to several enquiries from property investors, we have decided to clarify the French income tax for people investing in France or who currently have a French income.
The total net income is subjected to several band rates (like for the PAYE in the UK). It applies only on the income realised in France if you aren’t a French resident.
1. The total net income is divided by the number of family tax quota (1 for a single person, 2 for a married couple).
2. A different rate is applied for each tax band.
3. The total amount obtained is multiplied by the number of tax quotas.
Here are the 5 French income tax rates (valid for 2014 tax year):
- Up to €9,690: 0%
- From €9,691 to €26,764: 14.00%
- From €26,765 to €71,754: 30.00%
- From €71,755 to €151,956: 41.00%
- Beyond €151,956: 45.00% (This is very similar to the UK tax income rates)
The Finance Act of 2014 is aimed at low-income households. If you are liable to pay tax of less than €1,016, a rebate is payable to you. This discount is the difference between €508 and half of your income tax before discount.
In 2015, the French government voted a small change in the Finance Act and introduced a reduction when the income tax is less than €1,135 for a single person and €1,870 for a married couple. For a single person, the discount will be the difference between €1,135 and the gross income tax.
Another major change is the abolishment of the controversy tax of 75% applied on income up to €1,000,000 on the 1st of January 2015.
Some examples to illustrate:
Example 1: a married couple without children (=2 shares) has a total net income of €100,000. They have a shared income of €50,000 each.
Each of their shared income is imposed by band according to the tax band as shown above.
They will pay fewer taxes than a single income person earning €100,000 per year because he will have to pay 41% taxes while their individual incomes are lower than €71,754 each so they will pay only 30% saving 11% taxes.
Example 2: the total taxable income of a single person is €35,926. He will pay:
- 0% on the band lower than €9,690
- 14% on the income bracket ranging between €26,764 and €9,691. That is to say
- 14% X (26,764 – 9,691) = €2,390
- 30% on the income bracket higher than €26,765. That is to say 30% X (35,926 – 26,765) = €2,748
The total tax income to be paid by this single person will be: 2,390 + 2,748 = €5,138.
Example 3: for the foreign property investor: Mr. Smith (UK resident) owns a French property investment with an annual rental income of €10,000 and has an interest only mortgage which costs €3,000 per year. He can deduct the interests from his French income: 10,000 – 3,000 = €7,000 per year. It is below €9,690 which is the lower tax band at 0%. Thus he doesn’t pay income tax on his investment.