FAQs – Questions and answers on French tax law

When is the payment of the wealth tax (ISF) to be made?

Wealth tax must be paid by self-declaration and payment before 15 June of each year, or before 15 July for most foreign taxpayers. The submission of a separate wealth tax return only applies to taxpayers with taxable assets in excess of € 2.57 million. Other taxpayers declare their assets in their income tax return.

Which circumstances can lead to tax deductions (selection)?

Maintenance payments, social security contributions and solidarity surcharges (CSG/CRDS), expenses for supplementary pensions.

What tax allowances and deductions are there for income tax (selection)?

Flat-rate deduction for income-related expenses (salaried employees): 10%, max. € 12,097.
Flat-rate discount on pension: 10%, max. € 3,689.
Specific flat-rate discount for income from renting and leasing depending on the location and condition of the property 10% to 70%.

How is the income tax (IR) calculated?

The income tax due in each case is calculated using a graduated model. For married couples with or without children, the number of shares (“part”) of the taxpayers of a family is calculated first. Each spouse corresponds to a “part”. The first two dependent children each correspond to an additional half part and each additional child to a “part”. A family with three children thus corresponds to 4 (=1+1+0.5+0.5+1) “Parts”. The total taxable income of the family is then divided by the sum of the parts.

When is the VAT (TVA) to be paid?

The value added tax is to be paid each month with simultaneous submission of the value added tax declaration. In the case of VAT revenues of less than € 4,000, the VAT return must only be submitted quarterly.

What services are subject to VAT in France?

The field of application of VAT is very broad. In principle, it applies to all supplies of goods or services against payment. However, certain goods and services are exempt from VAT by law. In addition, there are extensive derogations which allow supplies of goods or services which are not actually subject to VAT to be subject to VAT as an option.

What is the tax rate for the annual solidarity tax and which businesses are affected?

Taxable enterprises are those whose annual turnover is at least € 760 thousand. The tax rate for the annual solidarity tax is 0.16% of the previous year’s turnover excluding VAT.

What are the income tax regulations for micro-enterprises?

In the case of qualification as microenterprises, certain benefits and simplifications can be derived from this.
For service companies with an annual turnover excluding VAT of less than € 32,900, a flat-rate deduction of max. 71% of the annual turnover applies to the calculation of the assessment basis for income tax.

What are the corporate tax benefits for “Young Innovative Enterprises”?

The “Jeune Entreprise Innovante” (JEI) status is granted to small or medium-sized enterprises, regardless of their legal form, which were established less than 8 years ago and whose research and development expenditure represents at least 15% of their total expenditure. This is subject to the condition that the majority of shareholders are natural persons or another JEI and that the business activity of the company is innovative.
Companies granted JEI status are fully exempt from corporate income tax for one year and 50% for the following year. The maximum tax benefit is €200,000.

How is tax compensation for business use of private vehicles regulated?

As compensation for the business use of private vehicles, a flat-rate kilometre allowance may be provided. If the guidelines adjusted annually by the tax authorities are complied with, the amounts paid are tax deductible.

Is there an input tax deduction for the purchase of French company cars?

No. All vehicles, with the exception of passenger transport companies (e.g. taxi or bus companies) intended for the transport of passengers, are subject to this deduction. The input tax deduction prohibition also applies to spare parts and individual parts as well as repair services and lead-free petrol costs incurred for the vehicle. For diesel gasoline costs, however, input tax is deductible at 80%.

Are other taxes levied?

Ownership of a French property triggers a number of levies, such as local property taxes (“Taxe foncière” and “Taxe d’habitation”), which are levied annually by the municipalities and departments. The corresponding tax rates are set at local level.

When are private foreign taxpayers subject to French wealth tax (ISF)?

This is the case when the net market value of their real estate holdings located in France (including shares in real estate companies) exceeds a certain limit (€1,300,000 in 2014). The rapid growth of the real estate market over the last ten years (more than 80% growth) has led to a significant increase in the number of ISFs.

What type of tax is levied on the purchase of real estate in France?

As a rule, it is subject to property tax, which is normally owed by the buyer and paid by the notary when the property is registered in the land register. However, the transaction can also trigger VAT at the normal rate of 20%, for example if the property was completed less than five years ago.

What should I bear in mind when buying a property in France?

Most investors should analyse the tax consequences and the associated financial risks before investing in real estate. The mere ownership of a French property, even if only for private use without speculative intentions, can already trigger a multitude of tax obligations, such as the wealth tax, which in France, compared to most other European countries that they have abolished in the meantime, certainly will be retained for some time.