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France Tax Overview
As an advanced and fully industrialized country, France is known as the third-largest economy in Europe and the sixth-largest in the world in terms of GDP. Its pro-business environment, large financial market, and highly skilled workforce make it particularly attractive. France is also known for its significant tourist industry and cultural influence.
Here’s everything you need to know about personal taxes in France:
You’re liable to pay taxes in France if you meet any of the following criteria:
- France is your main place of residence or home
- You have been resident in France for more than 183 days in a calendar year
- Your main occupation is in France
- Your most substantial assets are in France
If you work abroad, but your spouse and children live in France, you may also be considered to be a tax resident of France.
Personal income tax rates in France vary from 0% to 45%. Income tax is calculated according to the total income of the household.
If you are considered to be a tax resident of France, you will pay tax on all of your income earned within the country as well as any earned abroad. However, France has a number of Double Tax Treaties (DTT’s). You can claim a tax credit in France, using these DTT’s, if you paid tax on your foreign income to another country.
The sale of one’s main residence is exempt from capital gains tax. However, second homes or homes owned for other purposes outside of residence are subject to capital gains taxes.
These rates range from 36.2% to 42.2%, depending on the gain realized. Both non-residents and residents are responsible for these taxes, and the rates are the same.
A wealth tax also exists for those individuals with assets of at least EUR 800,000. The wealth tax ranges from 0.50% to 1.50%.
Here’s everything you need to know about corporate taxes in France:
Companies in France are either taxed on income or at a corporate tax rate, depending on the legal structure of the company. Individuals working as freelancers or self-employed workers may opt to be taxed on their income.
The normal corporation tax on companies in France is 33.33%. This tax rate is applicable to companies that:
- Have an annual profit exceeding EUR 38,120
- Earn an annual turnover of EUR 7,630,000
- Have a shareholder makeup of less than 75% natural persons
The corporate tax rate is reduced to 15% in cases where:
- The annual profit is less than EUR 38,120
- Annual turnover is less than EUR 7,630,000
- At least 75% of the shareholder capital is owned by natural persons
If the company’s annual turnover exceeds EUR 250,000,000, the company will be subject to an additional 10.7% tax rate.
A resident company is subject to corporate income tax on its French-sourced income. Income attributable to foreign business activity or to a foreign PE is excluded from the French tax basis.
A non-resident company is subject to corporate income tax in France on income attributable to French business activity or to a French PE, as well as on income from real estate located in France.
The most significant tax incentives available in France apply to foreign tax credits available through double tax treaties. In addition, there is an R&D tax credit available for such activities that are found to be research and development related. This tax credit is equal to 30% of R&D expenditures up to EUR 100 million and 5% beyond this amount.
Value-added taxes, better known as VAT taxes, are a common form of consumption tax. The value-added portion is the difference between a company’s sales and its cost of purchasing services or goods from another business. Here’s what you need to know about VAT taxes in France:
Companies making taxable products in France must register for VAT. However, French businesses that supplied products worth less than 34,600 euros or services worth less than 86,900 euros are not required to register for VAT. Foreign companies providing services and goods in France are also required to register for VAT.
The standard VAT rate in France is 20%. There are reduced rates of 5.5% and 10%, which apply to certain goods and services, including food products, gas and electricity, passenger transport, hotels, and cultural activities.
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