Tax implications for individuals relocating to France

If you are considering relocating to France, it is essential to understand the tax implications that come with becoming a fiscal resident in the country. France has a comprehensive tax system, which includes obligations related to income tax, social contributions, and wealth tax on real estate. Here's a brief overview of what you should expect:

Income Tax:

Residency: Once you become a tax resident in France, you are liable to pay French income tax on your worldwide income, subject to provisions of tax treaties aimed at avoiding double taxation and to specific French domestic tax rules.

This status is typically determined if you live in France for more than 183 days during a calendar year, have your main home in France, or if your primary economic interests are based in the country.


Filing obligations:

New residents are required to file an income tax return in the year following the year of their arrival. Tax returns are generally filed in May of each year.

Declaration of foreign bank accounts, foreign life insurance and foreign crypto assets accounts:

Individuals that are French tax residents must declare, simultaneously with their income, the references of foreign bank accounts, foreign life insurance policies as well as digital asset accounts opened, held, used or closed abroad.

This reporting obligation consists in filling in the 3916 form for each account or life insurance policies held.

In the event of failure, a fine of €1,500 is applied (€10,000 if the account or the life insurance policy is held in a State or territory that has not signed an administrative assistance agreement with France allowing access to banking information).

These amounts must be understood per account and per year.


Rates and Brackets:

France employs a progressive tax rate system for individual income. The rates and brackets can vary year by year. It is essential to stay updated or seek advice from a tax professional.

According to the finance bill for 2024, the tax brackets are as follows:

Portion of taxable income (one part - single)	Rate
=< €11 294	0%
From €11 294 € to €28 797	11%
From €28 797 to €82 341	30%
From €82 341 to €177 106	41%
More than €177 106	45%

However, some incomes or gains are taxed at a fixed rate, such as investment incomes (12.80%) or real estate capital gains (19%).


Social contributions:

Scope: These levies apply to all incomes generated from capital and property. This includes, but is not limited to, dividends, interest, and property income.

Rates: The general rate for social contributions on investment and property incomes is 17.2%.

Persons covered by a compulsory health insurance scheme in another Member State of the European Union or of Iceland, Norway, Liechtenstein or Switzerland may benefit from a lower rate of 7.5%.

The general rate for activity (e.g. salaries) or replacement income (e.g. pensions) is 9.7% but may be less under some conditions.


Wealth Tax on Real Estate (Impôt sur la Fortune Immobilière - IFI)

Applicability: If the net value of your real estate assets in France or outside France exceeds a certain threshold, currently fixed at 1.3 million euros, you may be liable for IFI.

This tax replaces the former wealth tax (Impôt de Solidarité sur la Fortune - ISF) and focuses solely on real estate assets.

Tax rate goes from 0.5 to 1.5%.


Exemptions: Certain assets, such as professional properties, might be exempt. Foreign real estate assets can also be exempted from wealth tax on real estate:

• Either because of the general exemption for new French tax residents, for the first 5 years;

• Or because of specific provisions of a tax treaty between France and the other State, where real estate is located.

It is essential to get detailed advice on potential exemptions and deductions available. in particular, the rules for deducting debts can in certain cases be restrictive.


Declaration: French Wealth tax is declared and paid annually. The value of your assets as of January 1st is what is considered for this tax.


Conclusion:

Becoming a tax resident in France can have significant implications for your financial situation. It's crucial to understand your tax obligations and plan accordingly. As a specialized French tax law firm, CM-Tax The, founded in 2007, and its team of English speaking tax lawyers based in Lyon and Marseille but operating throughout France, offers comprehensive guidance and support to those relocating to France, ensuring compliance and optimization of their tax positions.