Taxation of Income in France 2019
Delay in the introduction of PAYE
in France means that most 2018 income will escape income tax and
social charges in 2019.
The system of 'Pay-As-You-Earn' may
well have been in existence in the UK for a long while now but
it is new and being imposed only now in France .
For many households and certainly
expats living in France , there will be very little practical
This is because several million households
already elect to pay 'on account' (over 10 months) provisional
payments of income tax to which they may be liable in the year,
based on the tax they paid in the previous year.
However, the double imposition of
income tax in 2019 has meant that the government have been obliged
to forgo tax revenues due on 2018 income - in most cases!
Here is how it could affect you and
your taxation this year
From January 2019 the tax office will
deduct a sum each month (15th day) as a withholding tax on 2019
income. The sum payable would have been advised on your income
tax notice for 2018 (on 2017 income).
In May 2019, everyone will be obliged make a tax return on their
2018 income, and although a full tax assessment will be carried
out, no tax will be taken, provided the earnings are in line with
the income declared in the previous three years - 2015, 2016 and
The provisional payments that would
normally be required to be paid in 2019 on income earned in 2018
will simply not be levied.
To cancel out the tax imposition each
household will be granted a tax credit, which has been named crédit
d’impôt modernisation du recouvrement (CIMR).
The greatest significance to Ex pats
in France is that the CIMR will also apply to the social charges,
which will also be cancelled for 2018 for income affected by the
"Il en sera
de même des prélèvements sociaux afférents
aux revenus concernés par la réforme",
says the government website.
Tax credits that might normally be
granted in 2018 will simply be carried forward to 2019 and credited
in that year, but with an advance payment of 60% payable in January
There are four exceptions to the exemption
from taxes on 2018 income.
i. Exceptional Income
– This includes any income that exceeds the income earned
in any of the previous three years which could be taxed and payable
in September 2019. Pension capital sums and similar exceptional
payments will also be taxed. Income arising from a new business
created in 2018 will not be regarded as exceptional.
The taxation of exceptional income
will be used to ensure that individuals do not artificially inflate
their income earned in 2018, either by bringing forward income
that might normally be taxable in 2019 or delaying income that
might ordinarily be received in 2017!
ii. Capital Gains -
Remaining outside of the tax credit relief in 2018 will be capital
gains. Those on the sale of real estate will be taxed in the normal
manner at source by the notaire at the time of sale.
iii. Investment Income -
Dividends, interest and stock gains will also continue to be taxed
at source, as currently occurs, with no tax credit.
- The position for micro-entrepreneurs will depend on the basis
on which you have elected to pay your income tax. Those who elected
to pay income tax each month/quarter with their social security
contributions in 2018 (called the prélèvement libératoire)
will see no major change. In effect, they are already on PAYE
for their business income. Accordingly, in such cases the tax-free
year will not apply, an injustice that has been noted by some
commentators and politicians, although the government appears
to have rejected any change to the arrangements. Only if you have
not opted for the prélèvement libératoire
will you obtain a tax credit.
Implications for Expatriates
For retired expatriates in France,
or for those who run a micro business, there will be very little
change once this new taxation at source is in full swing, although
they will benefit from the tax relief on 2018 income like everyone
else, other than in the case of those exceptions listed above.
Clearly, in future, where pension
or salaried income is generated from outside of France there can
be no deduction at source.
Only if you have not previously elected
to pay on account each month, and pay in three instalments each
year, will it change to a monthly (or quarterly) deduction from
your bank account.
The final assessment of your liability will be carried out following
submission of your tax return, when you will either receive a
tax refund or be required to pay any additional tax due over a
If you do not actually pay any income
tax you will not be required to pay provisional monthly payments.
Similarly, in the event of any significant
change of earnings during the course of the year you can ask the
tax authority to change your tax code. However, if you do so,
and your income is 10% greater than advised, you will face a tax
penalty of at least 10%.
As far as non-residents are concerned,
in future rental income will be subject to 'on account' deduction,
as occurs for residents.
for the French income tax return 2019