The French tax system is one of the most complicated systems in the world today. Therefore if you are an expat in France, it may seem difficult for you to understand the France tax system hence why you need tax advice for expats. There are two types of taxpayers in France; residential and non-residential. To be deemed a residential taxpayer, you have to stay in France for at least 183 days or more. However, France will be considered your permanent residence if France is your primary abode. There are various determinants for the location of your permanent residence—for instance, your primary assets and your family’s location, among others. Individuals who are not deemed residents are solely taxed on income earned in France. In most cases, French residents must file general income tax returns by the end of May after the applicable tax year.
Unless officially specified by the French Tax Authorities, all income in France is subject to French taxation, including expat income tax. Tax rates are progressive and limited at 45 percent, plus a 3 percent surtax on income above EUR 250,000 for singles and EUR 500,000 for married couples, and a 4 percent surtax on income beyond EUR 500,000 for singles and EUR 1 million for married couples.
Non-residents of France do not qualify for the usual exemption, and their income is subjected to progressive tax withholding rates of 0%, 12%, and 20%, depending on total taxable compensation. Even if tax has been withheld at source, a yearly individual non-resident income tax return is necessary once compensation reaches the 20% band. However, the Inbound Assignee Regime is a specific tax regime in France for foreign citizens on temporary assignments. However, to be eligible, you have to have not resided in France for the previous five years, and also, you should not be assigned a job there for more than eight years. Additional remuneration or benefits, such as housing allowances or relocation fees, are tax-free in France. Before starting work, these items must be addressed in the employment contract. A French company that hires individuals might choose a 30% tax exemption instead of the itemized exemptions listed above under the same system.
If you come from the U.S, there’s an existing tax treaty between France and U.S. A tax treaty between the United States and France helps define which country should pay specific taxes and when those taxes should be paid. The pact is simple to understand. Several unique expat tax treatments may assist your U.S. expatriate tax return while dealing with your France Expat Tax. In reality, for many U.S. expats, it may result in a tax-free status in the United States. However, even if you get tax-free status, a U.S tax return must be filed.
If you work in another country, you almost certainly meet the filing requirements and are required to file a tax return. It’s essential to remember that tax benefits like the foreign earned income exclusion and the foreign tax credit won’t affect your tax liability or return until you claim them on a filed tax return.
In conclusion, there are many tax issues to consider regarding France’s expat tax advice, but the following are by far the most typical tax benefits.