GLOBAL MOBILITY SERVICES: TAXATION OF INTERNATIONAL ASSIGNEES - FRANCE - PWC
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Global mobility Services:
Taxation of International Assignees
- France
People and
Organisation
Global Mobility
Country Guide
(Folio)
Country:
France
Introduction: International assignees working in France 4
Step 1: Understanding basic principles 5
Step 2: Understanding the French tax system 7
Step 3: What to do before you arrive in France 14
Step 4: What to do when you arrive in France 16
Step 5: What to do at the end of the year 17
Step 6: What to do when you leave France 19
Step 7: Other matters requiring consideration 20
Appendix A: Tax computation using 2017 French personal income tax rates 27
Appendix B: 2017 individual income tax liability at different salary levels 29
Appendix C: Tax-free benefits for expatriates in France and/or French
headquarters 31
Appendix D: Total levies on selected income 32
Appendix E: Deductible expenses and tax credits 33
Appendix F: Social security contributions 35
Appendix G: France contacts and offices 37
Additional Country Folios can be located at the following website:
Global Mobility Country Guides
Global Mobility Country Guide (Folio) 3
Introduction: International assignees working in France This booklet has been prepared to For income received as of 1st provide a general background to January 2018, the marginal tax rate French personal income tax for is of 45% and the number of tax expatriates qualifying as French tax brackets is set at 5 (excluding special residents. surtax on high income of 3 and 4%). This booklet is not intended to be a This special surtax on high income is comprehensive or exhaustive study due if the “reference income” of French tax law and should not be exceeds € 250,000 for a single used for completing French personal taxpayer (€ 500,000 for taxpayers income tax returns. Some of the tax taxed jointly). rates, exemptions and allowances have been omitted from the booklet The special surtax rate is 3% from € because they tend to vary from year 250,000 to € 500,000 for a single to year. Where such information has taxpayer (€ 500,000 to € 1,000,000 been included, the data is based for taxpayers taxed jointly) and 4% upon the tax law applicable to 2018. above. Last Updated: April 2018 This document was not intended or written to be used, and it cannot be used, for the purpose of Menu avoiding tax penalties that may be imposed on the taxpayer. 4 People and Organisation
Step 1:
Understanding basic principles
The scope of French subsequent child. Thus, the general social security tax
taxation income of a married taxpayer (“Contribution Sociale
with three children is split Généralisée” – “CSG”) and a
1. An international assignee sent to into four. contribution to the
work in France will, in general, reimbursement of the social debt
become liable to French taxation 5. However, the tax saved from (“Contribution au
either as a resident or as a non- income splitting is limited Remboursement de la Dette
resident of France. The main tax depending on the net taxable Sociale” – “CRDS”). Employees
of concern for an international income of the tax household who are not deemed as French
assignee is personal income tax (please refer to Appendix B). tax resident are not liable to
(“impôt sur le revenu”); it applies Figures vary for persons taxed French CSG / CRDS surtaxes on
to the worldwide income of tax jointly and for single and their employment income.
residents in France and to the divorced taxpayers with
French source income of tax dependent children. Husband and wife –
residents of other countries,
6. With the combination of income- Civil partnership
unless otherwise provided by a
splitting rules and progressive (PACS)
tax treaty signed between France
tax rates, the top marginal tax
and the relevant state. It should 9. Married taxpayers or civil
rate begins at a net annual
be noted that France has an partnership taxpayers (persons
taxable income of approximately
extensive tax treaty network. who have concluded a contract
€ 155,000 for a single person and
called PACS) are generally
The tax year at around € 310,000 for jointly
required to file a joint income tax
tax persons.
return stating the aggregate
2. The French tax year runs from 1
Please note that global income world-wide income of both
January to 31 December.
tax under € 61 is not collected by spouses/partners, and
Methods of the tax authorities. dependents, unless a tax treaty
provides otherwise.
calculating tax 7. French employers do not deduct
3. Each category of income is withholding tax on salaries paid 10. For French tax purposes, a
combined and, after deduction of to French tax residents. dependent may be a child under
allowances, taxed at progressive However, France will move to a 18, a child between 18 and 21, a
rates. An example is set out in tax withholding system as from child between 21 and 25 if in full-
Appendix A. year 2019. The tax withholding time education or a disabled
would be applicable on person regardless of age.
4. Total income is split according to employment and self
family status (ie. 'the more Under specific conditions, a
employment income, on
children you have, the less tax dependent may also be a
pensions, unemployment income
you pay’). Under income- disabled person, living in the
and rental income. (see
splitting rules, total taxable same house but who is not
paragraph 71).
income is divided by the number necessarily a member of the
of shares awarded to the Tax is deducted at source for family.
taxpayer: one share for a single non-residents, as outlined in
person, two shares for a taxpayer paragraph 21 below.
taxed jointly without children,
8. However, French employers
half a share for each of the first
must generally withhold French
two dependent children and one
social security contributions, a
full share for the third and each
Global Mobility Country Guide (Folio) 5
Determination of 12. If an expatriate working in Echange control
residence France is considered to be a purposes
resident in both France and the
11. An individual is deemed to have home country, reference is made 14. For French exchange control
his tax domicile in France if: to the relevant tax treaty, if any, purposes, a non-French national
to determine the country in qualifies as a resident when the
He has his home in France (ie
which the individual will be place of his principal abode is
the place where he and his
regarded as resident. in France.
family usually live) or, if he
has no home in France or 13. Most tax treaties signed by 15. As far as exchange control
abroad, France is the place of France consider the following regulations are concerned,
his principal abode; or items to be relevant in French residents and non-
determining the place of residents must declare to the
France is the place where he
residence: French customs authorities any
performs his main
transfer of funds exceeding €
professional activity; or A permanent home;
10,000 into or out of France,
France is the centre of his Personal and economic with the exception of bank
economic interests. relations (centre of vital transfers for which the reporting
interests); requirements are the
Only one of these criteria needs responsibility of the financial
to be met in order to qualify as a An habitual abode; and institution.
French tax domiciliary. Unlike
certain other jurisdictions, being Nationality.
considered domiciled in France
These criteria are analyzed
does not reflect the intention to
successively in descending order
return to or remain in France;
of priority.
rather, it is a synonym for
tax resident.
6 People and Organisation
Step 2:
Understanding the French tax system
Taxation of election by the employer, at 21. Non-residents liable to French
employment income the rental value used by the personal income tax on
Tax Authorities to levy local employment income are subject
16. Employment income is widely taxes. In order to qualify, the to withholding tax to be paid by
defined and includes all expatriate must not be a the empoyer each quarter. After
employment benefits provided by managing director of the deducting mandatory employee
the employer, whether in cash or company owning or renting social security contributions and
in kind. the dwelling; the standard 10% salary
deduction, employment income
In addition to salary, taxable However, “expatriate” is subject to withholding tax at
employment income includes allowances may be fully source at the rates of 0%, 12%
notably bonuses, commissions, exempt from French personal and 20%. The 12% withholding
overseas' adjustments, cost of income tax according to the tax is a final non-refundable tax.
living allowances, housing special inbound tax regime Non-residents are nevertheless
allowances, tax reimbursements applicable (see paragraph 22). liable to French income tax on
and the private use of a company
the portion of the progressive
car. 17. Salaries and other related
benefits are taxed after deducting remuneration which reachs the
Benefits-in-kind are, as a general employee's mandatory social 20% band. If the resulting tax is
rule, included in taxable income higher than the 20% withholding
security contributions except
at market value. The following CRDS and part of CSG and after tax, the 20% withholding tax
are exceptions: a standard allowance for levied by the employer is offset
but an additional income tax is
professional expenses equal to
Reimbursements of travel due by the employee.
10% of taxable employment
costs incurred by an employee
income (maximum allowance of
exclusively for business
€ 12,305 for 2017 French
purposes and furniture
personal income tax).
removal expenses are
generally both fully non- 18. An employee may elect to deduct
taxable; actual professional expenses
incurred instead of the 10%
A cash lump sum provided by
standard deduction but, in this
an employer to compensate
case, all expenses reimbursed by
the employee for housing
his employer must be added back
costs is assessed in full for
to his taxable salary.
income tax purposes,
although housing (rented or 19. Qualifying professional expenses
owned by the employer) include certain commuting
provided to the employee is expenses, meals taken while
subject to special rules. In this away from home and
case, the taxable benefit is professional documentation.
assessed, not at the actual
cost of the rent, but at the 20. Professional advice should
fixed rates provided by the be sought before any option is
French social administration elected to deduct actual expenses
(depending on the level of since various conditions must be
remuneration as well as the met to ensure deductibility.
number of rooms) or, upon
Global Mobility Country Guide (Folio) 7Special income tax job in the same or a similar France more than six years as
regimes for assignees company established in France). salaried employees and providing
they were not regarded as French
into France It also provides an exemption of tax residents in the year
(“inbounds”) part of the remuneration based preceding their transfer to
on foreign workdays. The France. In particular, the
taxpayer has the choice between reimbursement by the employer
22. Inbound assignee regime (Article two limitations. The total of tuition fees for dependent
155B of the French tax code): exemption (i.e. on salary children enrolled in either
This regime came into force on 6 supplements – actual or not – primary or secondary schools
August 2008 and is applicable as and foreign workdays) is limited may be tax exempt.
of the 2008 French income tax to 50% of the total remuneration.
year. It applies to employees The individual may also elect 24."French outbound” regime
assigned to France by their instead for an exemption of (article 81A of French tax code):
foreign employer as from 1 French tax connected with Specific regimes were created for
January 2008 or to employees foreign workdays limited to 20% employees maintaining their tax
directly recruited abroad by a of the taxable remuneration. residence in France and assigned
French company as from 1 by their French employer or by
The availability of this inbounds an employer established in a
January 2008. In both cases, the regime is limited to the first five
individuals must not have been state of the European Union or of
years following the year of arrival the European Economic Area
French tax resident during the (8 years for inbounds who take
five calendar years preceding the and which has signed a tax treaty
their function in France as of with France, which includes
year of beginning of their July 6, 2016).
assignment/employment provisions relating to
in France. In case of mobility (change of administrative assistance, to
employer) within the group as carry out part of their
Under this regime, individuals professional activity out of
from August 2016, the employees
assigned to France by their will keep the benefit of the France.
foreign employer can benefit inbound regime but only for the
from a French income tax Thus, a per diem allowance for
initial duration of the regime. business trips made out of
exemption in relation to salary
supplements connected with In addition, the inbound regime France exceeding 24 hours may
their assignment. legislation cannot be cumulated be allocated by the employer to
an employee and attract a
with the regime available to
For employees directly recruited French outbounds (see favorable tax regime providing
abroad, the new regime offers an paragraph 24). that certain conditions are met.
option with regards to the tax In particular, the “Travel
treatment as follows: Since these tax regimes are Hardship Allowance” must be
subject to strict conditions, we determined before the
The exemption of the actual would recommend that you seek professional activity abroad
amount of salary professional advice at the earliest starts; the amount must remain
supplements received; or possible stage before filing your within a limit of 40% of the
French income tax return. global annual remuneration.
In the event that there are
no such salary supplements, 23. General Inbounds Regime: If the relevant conditions are
upon election, a flat rate certain expatriates who cannot met, this per diem allowance is
exemption of 30% of the benefit from the above “inbound not taxable but taken into
total remuneration. regimes” (or for whom a claim account to determine the
under these provisions might not average tax rate applicable to
The regime still provides for a
be beneficial) may be able to other income fully taxable in
“floor” of taxable compensation
claim a full exemption in respect France.
(i.e. the taxable compensation
cannot be lower than the taxable of certain “expatriate” allowances
remuneration paid for a similar (please refer to appendix C),
providing they do not stay in
8 People and OrganisationIn addition, other tax Taxation of applicable in addition to the
exemptions could be considered 30% PFU.
investment income As with the current flat rate
when:
26."Inbound” tax regime: withholding system, interest
Tax paid in the foreign and dividends paid to
inbound assignees that benefit
country equals at least two- individuals domiciled in
from the “inbound” regime France will be subject to
thirds of the income tax that (Article 155B of the French Tax withholding at source to be
the individual would have Code) can exempt 50% of the operated by the payers of
paid in France on the same amount of the following income, the income (or by the
income ; or under certain conditions, which individuals themselves in
mainly relates to the geographic some cases).
Specific activities enumerated Taxpayers with low income
situation of the paying entity:
in French Tax Code are may, if they choose, opt to
performed, if the presence Interest and dividends; tax all of the income subject
abroad extends more than 183 to the PFU at the
Royalties; progressive income tax
days in a 12-month period
rates. In this case, the 40%
(120 days for business reduction previously
Capital gains; and
prospecting). applicable to dividends
Industrial and intellectual remains applicable. It
Taxation of self- property gains. should be noted that this
employment income option is applicable to all of
27. Generally, a French resident the income subject to the
25. Profits or gains derived from is liable to French income tax PFU without a possibility of
trades, professions or vocations a partial option. It will be up
on investment income, to the taxpayer to determine
carried out in France are subject whether from French or
to tax regardless of whether the the impact of the PFU on
foreign sources. Investment their fiscal situation before
individual is resident of France. opting for the application of
income is subject to a flat rate
If the individual is resident in tax (« PFU », sometimes the progressive rates,
France, a liability may also arise referred to as the « flat tax ») keeping in mind that the
on profits or gains on activities option for the PFU should
beginning January 1, 2018.
carried out abroad unless tax be more favorable for
The overall PFU rate is set at taxpayers whose income
treaties provide otherwise. 30%, including income tax at reaches the 14% tax rate
Professional expenses are 12.8% and social surtaxes at bracket.
deductible from the profit. In 17.2%. As a consequence of the
introduction of the PFU, the
addition, the taxpayer should
The income items subject to the PFU rate of withholding tax
registered with an “Association applicable to dividends and
are, notably, the following:
de Gestion Agréée” in order to interest paid to individuals
avoid the application of a 25% fiscally domiciled outside of
All investment income (interest,
increase on the net profit for the distributed income, dividends, France is set at 12.8%.
calculation of the French tax director’s fees, and similar income),
liability. including interest earned on housing The flat 40% reduction
savings accounts (PEL, CEL) open previously applicable to
Non-salaried individuals may starting in 2018. dividends subject to the
also benefit from the new 30% PFU is cancelled,
unless the taxpayer chooses
“inbound” regime under certain The application of the PFU to to be subject to the
conditions and within certain financial income gives rise to the progressive tax rates.
limitations. following remarks:
28. Rental income is taxed as
Professional advice should The Exceptional ordinary income. Real estate
be sought at the earliest Contribution on High income (rental income and gains
possible stage. Income (CEHR) applicable
from real estate sales) is not
to a fraction of fiscal
reference income at the 3% subject to the PFU and remains
and 4% rates remains subject to the taxation at
progressive tax rates (with the
Global Mobility Country Guide (Folio) 9increase in the social surtax rate 29. Income received from (including special social
to 17.2%). furnished properties surtaxes of 17.2%).
is subject to French
When the tax household receives income tax as An additional tax is applicable
annual rental income (not business income. on real estate capital gains
relating to specific type of exceeding € 50,000 and realized
investments) lower than € When the gross rental income does on real estate other than
15,000, the gross income may be not exceed € 70,000 annually, a building lots. This tax is
directly reported on the tax special tax regime called "régime progressive from 2% to 6% and
return and is taxed after micro-BIC" is automatically is applied in addition to income
applicable by law. This regime leads
deduction of a fixed allowance of tax and social levies.
to 50% of the gross rental income
30% corresponding to expenses. received being taxed. The declaration of this capital
Alternatively, the tax household gain, as well as the payment of
However, it is possible to elect the
may opt for the determination of common law tax regime ("regime the related personal income tax,
rental income taking into réel") which is applicable and is made directly through the
account actual expenses paid irrevocable for a minimum period notary. However, it must be
(instead of the 30% flat rate of 1 years. The "régime réel" leads reported on the annual personal
deduction) such as mortgage to the determination of a net rental income tax to determine the
loan interest, management income being taxed (after “reference income” and
deduction of qualified expenses
expenses, repairs, property taxes therefore the potential
including mortgage interest and
etc.. However, no actual depreciation). In such a case, a application of the special surtax
depreciation cost will be taken French accountant is required for on high income of 3% and 4%.
into account. This election is the preparation of the accounting
made through the filing of the and specific filing. In addition, the In addition, the capital gain (up
annual personal income tax taxpayer should registered with an to € 150,000) relating to the
return and cannot be revoked for “Association de Gestion Agréée” in sale of a property in France by a
order to avoid the application of a non French tax resident may be
a three year period.
25% increase on the net rental tax exempt providing, in
Rental losses (generally due to income for the calculation of the particular, that the individual
French tax liability.
repairs), with the exception of was previously considered as a
interest on loans, are creditable French tax resident for at least
against other income up to a two years, the sale is made at the
Capital gains tax
limit of € 10,700 per year latest five years after the
provided that the lessor rent the 30. Generally, capital gains derived departure from France, or
property up to December 31 of from the sale of a principal without the condition of the five
the following three years. residence or the first sale of a years if he had the residence at
secondary residence (under his disposal at least as from 1
Depending on the nature of the conditions) are tax-free. January of the year preceding
property, rental losses exceeding the year of sale.
this limit are creditable against In addition, the capital gain
rental income only and can be realized on the sale of a The exemption is limited to one
carried forward for ten years secondary residence is tax free if property per tax household.
following the year in which the the sales price is less than
loss is incurred. The exemption is also applicable
€ 15,000 or if the residence has to nationals of non EU States
Deductible rental losses been owned for more than which have included a non
exceeding 10,700 € or when the 30 years. discrimination clause in their
taxable income received by the For property owned between 23 tax treaty signed in France.
taxpayer is lower than € 10,700, and 30 years, the gain is only
are creditable against of the submitted to social levies. The capital gains from the sale
taxable income of the following of shares, parts and other
six years. The net gain is taxed at a flat income and assimilated gains
rate of 19% i.e. a total of 36.2% (notably capital gains from the
sale of shares and gains from the
10 People and Organisationsale of shares and gains from France during at least six of the If the individual finally comes
fixed-term financial ten years preceding the transfer back to France, or if 15 years
instruments) is also subject to of their tax residency out of elapsed from the date of
the PFU (see paragraph 27). The France, are taxed upon this departure from France, the
PFU also applies to capital gains transfer on the unrealized capital gain or rights will benefit from
due upon transfers of tax gains related to securities, values an automatic cancellation/
residency outside of France (exit or rights which they hold, reimbursement of tax,
tax, please refer to paragraph directly or indirectly, in provided that certain filing
33). companies if their participation conditions are fulfilled.
in companies meet the following
At the same time, the reduction conditions:
for the holding period is
eliminated as of 2018, except as They give right to at least 50%
applicable to sales of shares in a of the companies’ profits.
PME subscribed to within ten These securities, values or
years of the creation, which rights can be held directly or
benefit from a “reinforced” indirectly, at the date of the
reduction for the holding period transfer of the tax residency;
if the shares were acquired or
before January 1st, 2018.
The value of this/these
Under certain conditions, participation(s) exceeds €
exchange of securities is subject 800,000 upon transfer of tax
to tax deferral. residency. These securities,
values or rights can be held
31. Capital losses on the sale of directly or indirectly, at the
shares are creditable against date of the transfer of the
capital gains of the same nature tax residency. These capital
and are subjected to the same gains or value of receivables
rebate depending on the length will be subject to the personal
of the holding of the shares. income tax according to
These losses can currently be progressive tax rates and
carried forward for a ten-year social surtaxes of 17,2%.
period following the year in
which the loss is incurred. There are several possibilities
allowing to defer the payment.
32. Taxpayers may invest in a special For example, it can be
savings plan called a 'Plan automatically suspended for
d'Epargne en Actions' ('PEA') transfers within the UE (plus
under which profits and capital Norway and Island) or upon
gains realized within the scheme production of a guarantee for
are exempt from French personal transfer to non-EU countries.
income tax, provided that the Filing obligations will have to
savings are not disposed of be followed in any case. Under
within a five-year period and certain conditions, the tax can
additional conditions are met. be refunded, if paid, or
The maximum investment is € relieved.
150,000 per taxpayer (i.e. €
300,000 for persons taxed In such a case, the payment of
jointly who are allowed to own tax will be deferred up to the
two PEAs). date of disposal of the
securities or rights.
33. As of 3 March 2011, taxpayers,
who have been tax residents of
Global Mobility Country Guide (Folio) 11Double taxation of benefits. Please refer to security scheme of his home
agreements appendix F for standard country.
mandatory contribution rates.
34. If exemption from French 42.An employee may benefit from
income tax is available under a 37. This system includes social this scheme for a longer period
treaty, it is sometimes security basic coverage (sickness, (five or six years depending on
calculated under the maternity, disability, death, the country of the EEA and
‘exemption with progression’ work-related accident benefits Switzerland), if certain
(EWP) method. The average and old age state pension), conditions are met.
rate of French tax on total unemployment benefits,
compulsory complementary 43. According to the France-US
income (including any income
retirement plans, complementary social security agreement,
exempt from French income tax
death/disability coverage and employees working in France can
under the treaty) is first
complementary health coverage. continue to benefit from the US
determined and then that
social security system, provided
average rate is applied to
38.The contributions are shared the duration of the assignment is
French taxable income.
between employer and employee; not expected to exceed five years.
35. Under renegotiated tax treaties on average the employer's share This applies where the employee
including notably those signed of contributions represents 45% can show that he has been sent
with Germany, Sweden, Italy, of the gross salary, the by his employer from the United
Spain, Switzerland, the UK, the individual's share 23% States to France and will remain
United States, a tax credit (including ‘CSG’ & ‘CRDS’). subject to US social security
system applies under which the (‘FICA’) and can demonstrate to
39.However, since the contributions the satisfaction of the French
foreign income is subject to
are assessed using various immigration authorities that he
French personal income tax
ceilings, the average rate will has adequate private medical
and a tax credit is granted
decrease as the gross salary coverage in the United States.
corresponding to the French
increases. However, the bi-lateral social
income tax attributable to this
income. 40. Generally, for any employee security treaty between France
who carries out a salaried activity and the USA does not cover the
The main practical difference unemployment charges.
in France, the employer
between the two systems is the
withholds the employer's and 44.If an expatriate is not on the
possibility to deduct from the
employee's share of French social payroll of a French resident
net taxable basis under the
security charges. However, company and is liable to French
‘exemption with progression’
France has entered into social security taxes, the foreign
the amount of actual tax borne
agreements with more than 40 employer is responsible for the
in the State where the income is
countries whereby expatriates payment of French mandatory
fully taxable.
temporarily transferred to social security contributions. The
Both systems result in France France may remain under home employee will have to be
taxing French source income country social security schemes registered as an isolated
taking into account the rate and exempt from French charges employee of a foreign company
applicable to worldwide income. provided they hold a valid without a permanent
France rarely uses the actual tax certificate of coverage. establishment with the URSSAF
credit method used by many of Strasbourg. The same
41. A European Regulation
countries (in particular the US), standard rates and rules as for an
n°883/2004 provides that an
at least for employment income employer established in France
individual temporarily assigned
or rental income from foreign are applicable. Please consult
by a foreign company from a
source. your advisor for further
country of the European
Economic Area (EEA) and information.
Social security taxes
Switzerland to work in France 45. Employee contributions to the
36.The French social security may, under certain conditions, French social security schemes
system is composed of various remain subject to the social are fully deductible for French
schemes providing a wide range
12 People and Organisationpersonal income tax purposes Generalized social Deductible expenses
(except CRDS and no deductible security tax ('CSG') and tax credits
part of the CSG).
and Contribution to 52. Certain specific expenses allow a
46. However, contributions paid to the Reimbursement of French resident taxpayer to
compulsory and supplementary the Social Debt reduce the final French personal
optional provident plans and income tax liability.
supplementary pension plans by
('CRDS') and other
both employers and employees social surtaxes 53. While some of these qualifying
are tax deductible within expenses are deductible from
48. French tax residents subject
certain limits. total net taxable income, others
to French mandatory social
can be offset against the personal
The excess contributions over security schemes are liable to
income tax resulting from the
the legal limits may be re- these levies assessed on their
application of progressive tax
characterized as taxable income. gross income related to
rates. These qualifying expenses
Thus, that part of the excess professional activity with a 1.75%
are outlined in Appendix E.
attributable to an employee's deduction limited to four times
contributions is not deductible the social security ceiling. The The global tax reduction is
from his taxable employment CSG rate is 9,2% and the CRDS limited to € 10,000 per year
income whilst that part rate is 0.5%. subject to certain exceptions.
attributable to the employer 49.These levies are not deductible
constitutes a taxable fringe for French personal income tax
benefit for the employee. purposes with the exception of
47. There is a comparable rule 6,8 % of CSG tax for income
applicable for social security tax subject to French progressive
purposes which may increase income tax rates.
both the employer's and 50.The CSG and CRDS taxes are also
employee's liability. due on French rental and
Given the complexity of this investment income. The CSG on
issue, please contact your social French rental and investment
security advisor for further income rate is 9.9% and the
advice. CRDS on French rental and
investment income rate is 0.5%.
Mandatory contributions made
to foreign social security systems 51. CSG on investment income
are also deductible for French exempted from French personal
personal income tax purposes. income tax does not give rise to
personal income tax
In addition, deduction of deductibility. In the same way,
contributions made to foreign CSG tax on capital gains and on
complementary health/ income qualifying for
disability/death and pension withholding tax at source as a
funds are allowed for taxpayers final payment (fixed return
qualifying as inbounds under the investment or French bonds, for
law applicable to inbounds. example) is not deductible from
taxable remuneration.
Nevertheless, these funds must
comply with specific conditions Additional social surtaxes are
in order to be tax deductible. We due on French rental and
recommend contacting our investment income.
experts to determine whether the Consequently, the rate of all
foreign plan contribution social surtaxes is 17.2%.
qualifies for tax deductibility.
Global Mobility Country Guide (Folio) 13Step 3:
What to do before you arrive in France
Work permits (for employment contract only) contract of at least one year,
salaried employees) category is now called ICT (intra assuming all other
corporate transfer) salarié requirements for use of fixed-
54. If an assignee is a non-European détaché, and the salarié en term contracts are met, or a
Economic Area (EEA) national, mission salarié (simultaneous standard ‘indefinite-term
they cannot perform a salaried home and host contract) category contract’) with a gross
activity in France without a work is now called passeport talent minimum annual salary of EUR
permit or a work visa depending salarié en mission. 53,876,11 (as of October 2016).
on the assignee's immigration
status. A work permit or work To qualify for this type of work These categories of admission
authorisation, the assignee must: below do not require
visa may take the form of either a
• be paid a gross monthly salary of establishing proof that no
temporary assignment work no less than one and a half times
permit or a salaried worker the minimum wage qualified candidate is available
permit.The appropriate type of (approximately 2,200 euros locally and also grant the
work permit will depend on the gross per month, for ICT salarié candidate’s spouse the right to
job position, level of salary, détaché and 2,700 euros for work in France.
seniority within the group, passeport talent - salarié en
mission ); It is also possible for a French
reporting line, management
• have at least three months of employer to hire an individual
functions, etc. Work permits are seniority with an entity of the who does not fulfil the
required even for short-term assigning group (consequently, conditions of the European
assignments in France (less than this category is therefore not
Blue Card Category, and has no
three months). appropriate for new hires); and
• be performing a function for his pre-existing employment
In 2007, the French legislature or her home employer within a relationship with another
created a new category of work French entity of the same group company of the same group in a
authorisation designed to for a period of no less than three salaried employee capacity
months and no longer than three (salarié). This latter category of
facilitate temporary intra-group
years for ICT salarié détaché ; work authorisation results in
transfers of assignees, a category authorisations for passeport
of authorisation named salarié the assignee having salaried
talent - salarié en mission are
en mission authorisations. There renewable beyond three years. employment status under an
are two sub-categories of salarié - To have either a certificate of employment contract with the
en mission: one where the coverage for social security French host entity. It should be
assignee only has an employment purposes or an attestation that noted that this category of
contract with the home employer French social security authorisation could receive a
(salarié en mission type détaché) affiliation will be requested, in refusal from the French labour
and one where the assignee has the visa application file. authorities as the future
an employment contract with the employer should check within
home employer and the host 56. Since 2012, the European Blue the unemployment market if
entity simultaneously (salarié en Card category applies to highly- somebody else could not
mission type salarié). qualified employees (three-year occupy the job that one
level university diploma or five proposes to one's candidate.
55. The reform of March 7, 2016 and years of professional experience
November 2, 2016 modified the in the area of the post to be There are several other types of
nomenclature, but not the basic filled) being offered an authorisations, notably those
aspects of these two intra-group employment contract with the for corporate officers and
work authorisations. The salarié French host entity valid for at several smaller categories for
en mission détaché (home least one year (a fixed-term specific professions.
14 People and Organisation‘Work’ in France will trigger uninterrupted previous residence
French social security liability, in France of at least five complete
unless a treaty exemption years and a French speaking
applies, and the application of level.
French labour law to a degree
that will depend on the Importing personal
structure of the work. possessions
The administration gives 60. EU nationals may import a
priority to a rapid processing of car duty-free if owned for at least
salarié en mission and six months. One may import
European Blue Card work other possessions duty free if
authorisations, which take these possessions have already
approximately 2 to 3 weeks been used for a certain period of
from the time of filing of the time. For non-EU nationals, one
application with the French must own a car for 12 months
consulate depending on the and other goods for six months.
assignee's home address or An inventory of goods imported
country of residence until the must be filed in duplicate.
time the assignee can pick
61. All tax-free goods imported by
up one's visa. For most other
non-EU citizens must be kept for
main types of work
at least a 12-month period from
authorisation, it generally takes
the date of importation.
between eight and twelve
weeks.
57. If the assignee is an EEA or a
Swiss national, they are exempt
from a French work permit as
well as from a residence permit.
Residence permits
58. A residence permit is generally
required for non-EEA nationals
who plan to stay more than three
months in France. This residence
permit can be issued for a 12-
month period or three years for
ICT salarié détaché or passeport
talent - salarié en mission and
European Blue Card categories,
renewable for the duration of the
assignment or as long as the
person still has the same
conditions of salary and
employment.
59. Furthermore, a full residence
permit could be valid for ten
years and allows an individual to
perform a salaried or non-
salaried activity. This permit is
granted only to individuals who
can prove, inter alia, an
Global Mobility Country Guide (Folio) 15Step 4: What to do when you arrive in France Registration 62.You are not required to register with the French tax authorities on arrival in France. Your registration will be made when filing your first French personal income tax return (i.e. the year following that of arrival in France). Social security obligations 63.Usually, a French employer will undertake the registration formalities with the social security authorities on behalf of an employee. If you remain covered under your home country social security schemes, you must have a certificate of coverage issued by the competent authorities. Depending on the expatriate's normal place of employment, immigration status and the social security treaty applicable, such certificates (some non-EU states, for example) may not exempt the expatriate and his employer from contributing to the French unemployment fund. 16 People and Organisation
Step 5:
What to do at the end of the tax year
Tax return 66.No income tax is paid in the year adjustment is possible under
of arrival in France (except for certain conditions. The balance
French tax residents (French non French tax residents liable of personal income tax is paid in
nationals and all other nationals) to tax withholdings – see November and December.
must generally file an income tax paragraph 22). Payment of income tax by
return before mid/end of May at 'prélèvements mensuels' must be
midnight of the calendar year Payment of tax due requested in writing or online by
following that during which income 67. If you have not been already the taxpayer as the installments
was earned. The taxpayers, whose liable to French income tax, you are withheld directly from the
main home is equipped with an must paid tax in one time, when individual’s bank account.
access to Internet, are invited to file the tax bill is sent to you during
the summer or fall of the year
Moving to a
their tax return on-line on the
government website when their following the year of your arrival withholding tax
reference income is more than: in France. (WHT) system
68. If you have already been 71. On 1 January 2019, for French
· € 28,000 in 2017.
liable to French personal income resident taxpayers, income taxes
· € 15,000 in 2018.
tax the previous year (income tax would now be paid on a pay as
on 2016 income), installments you earn basis. The scope of
In 2019, this e-filing requirement
must be paid by 15 February and income subject to the new
will concern all taxpayers regardless withholding tax system is very
15 May 2018 (toward the income
of their income level. wide and covers most categories:
tax liability due on 2017 income).
A fixed € 15 fine per form will be employment income, pensions,
Each installment amounts to
applied after two failures to file replacement income, annuities,
one-third of the income tax paid
using this process, except in self-employment income
in the preceding year i.e., based
particular cases (for example the (industrial and commercial, non-
on your 2016 French personal
elderly who have no access to commercial, agricultural) and
income tax liability. A tax bill will
internet). then be issued during the rental income.
summer, indicating the balance
64.For non French tax residents, the
of income tax due.
First and last year
same deadline as for French
in France
residents applies now. 69.Please note that amounts in
excess of € 1,000 must be paid to 72. Allowances and annual
65. The main French personal progressive tax rates apply in the
the French tax authorities by
income tax return (Form no. same way to part-year and full-
automatic payment or online via
2042) must be filed together with year tax residents.
the website of the French Tax
specific tax returns relating to
Authorities (impots.gouv.fr). 73. Because of French income-
particular categories of income.
This new process requires, in splitting rules, a married
In particular, a specific return
practice, a French bank account taxpayer with children may not
(Form no. 2047) must be be
or an account held in the SEPA reach the maximum marginal tax
completed when receiving
area. rate (45% for 2017 income) in the
foreign source income as well as
form no. 3916 for foreign bank 70. The French system allows French first year in France.
accounts held by French resident tax to be paid on a monthly basis
taxpayers. 74. Depending on your situation, an
upon request. Monthly payments Exit tax can be due (see
are equal to 1/10th of the prior paragraph 33).
year's income tax liability but an
Global Mobility Country Guide (Folio) 17When a French tax resident leaves France during the course of a tax year, he remains liable to French personal income tax on the aggregate of world-wide income earned as a French tax resident and also his sole French-source income earned as a non-French tax resident, subject to the provisions of an applicable tax treaty. 18 People and Organisation
Step 6:
What to do when you leave France
75. All of the departure-related tax 76. In addition, personal taxes (i.e. practical tax issues (e.g., change
obligations have been cancelled personal income tax, CSG and of the address, follow up
for individuals leaving France as CRDS surtaxes and habitation correspondence with the tax
of 1st January 2005 and a French tax) must be paid by the normal administration, payment
tax return must be filed by the deadlines (see paragraph 69). requests, etc), we recommend
normal deadlines. contacting our offices before
Nevertheless, since a departure leaving France.
from France may create
Global Mobility Country Guide (Folio) 19Step 7:
Other matters requiring consideration
Gift and inheritance
tax
77. French inheritance or gift tax French domestic rules This allowance is not
may be due by beneficiaries of described above. applicable in case of gifts.
assets transferred by way of
gifts or inheritance (heirs, 79. Inheritance tax is levied on 84. Gift tax is subject to the same
legatees and donees). assets at their fair market standard rules. However,
value, with allowances taking there are some differences.
78. If the deceased or the donor is into account the relationship Debts in relation to the
a tax resident of France upon between the deceased and the property transferred are not
date of inheritance/gift, tax beneficiary. Debts existing at deductible and if the donor
will be due in France on the the time of death are pays the gift tax himself, this
value of world-wide assets deductible in full. is not considered to be a
transferred. taxable benefit.
80. Inheritance tax is levied
If the deceased or donor is not according to tax schedules 85. In addition, a favorable tax
a tax resident of France, tax which vary depending on the regime is granted for gifts of
will be due on world-wide family relationship between specific assets made during
assets transferred only if the the beneficiaries and the the lifetime of the donor
heir/legatee/donee is a tax donor or deceased. provided certain conditions
resident of France upon are met.
inheritance/gift and has been 81. Since 2007, no inheritance
a tax resident of France for at tax is due for inheritance open 86. A reduction 50% of the gift
least six years any time during between spouses (or partners tax applies on gifts of business
the ten years preceding the of a PACS) and for inheritance assets provided certain
year in which he receives the between brothers and sisters conditions are met if the
assets by way of inheritance living together under specific donor is less than 70 years
or gift. conditions. old.
Regardless of whether the 82. Progressive tax rates ranging 87. It must be noted that parents
deceased/ donor or from 5% to 45% (i.e., can grant tax-free gifts to
heir/legatee/done are tax marginal rate applicable to their children (and
residents of France, tax will the portion of assets conversely) every fifteen years
be due on value of all personal exceeding € 1,805,677) apply up to a maximum limit of
and real property located in after a rebate of €100,000 for €100,000 per child, €80,724
France transferred by way of 2018 when beneficiaries are between spouses (applicable
inheritance or gift. direct dependents. to gifts only as inheritance
between spouses are tax-
Please note that applicable 83. Between non-related parties, exempt) and €31,865 for
double tax treaties addressing the rate is 60% after an grand-parents to grand-
inheritance and/or gift tax allowance of €1,594 for 2018 children for 2018. These
matters may modify the granted to each beneficiary. allowances are reviewed
each year.
20 People and OrganisationLocal rates
88. A habitation tax or 'taxe residence, to be applied over a ceiling, a progressive decrease
d'habitation' is levied on any three year period starting with would be provided for
individual who occupies a the 2018 tax year. 80% of all households whose fiscal
dwelling on 1 January, even if households are expected to be reference revenue is between
he is not the owner. The tax is exempted from the payment of these limits and 28 000 € for a
levied on a deemed rental this tax by 2020 as a result. single taxpayer (increased by 8
value and specific deductions 500 € for the first two half
are granted according to the This decrease in habitation tax parts for dependents) that is
number of dependent will be applicable to 45 000 € for a couple
children. There is also a households whose fiscal (increased by 6 000 € per
property tax, 'taxe foncière', reference revenue does not additional half part for
to be paid by the owner of exceed 27 000 € for a single dependents).
a dwelling. taxpayer, increased by 8 000 €
for each of the first two half 89. For eligible households, the
The Finance Act Bill for the parts for dependents, then by decrease will amount to 30%
year 2018 provides a gradual 6 000 € for each additional in 2018 and then to 65% in
decrease in the dwelling tax half part. In order to avoid 2019
applicable to a principal detrimental impacts of the
Wealth tax on real
estate properties
90. Article 31 of the 2018 finance called “impatriates” is wealth in excess of
bill cancels the wealth tax maintained; similarly to €10,000,000.
(ISF) in place in France since individual taxpayers with a tax
1982, and replaces it with a tax domicile outside of France, 96. Unlike French personal
on real estate property (IFI) individual taxpayers who have income tax, wealth tax is
beginning January 1, 2018, not been domiciled in France determined by the taxpayer
which is aimed at only real during the five years preceding and paid on filing the return,
estate properties. the transfer of their domicile normally by 15th June of the
to France are only taxed on the relevant year (deadline
91. The IFI applies to real estate property located in France, applicable for French tax
property which is not until December 31st of the fifth residents – the deadline will
attributed to the professional year following the year of be 15th July for non resident
activity of the owner. arrival in France. taxpayer).
92. The relevant date (January 1st), 94. The applicable range and the 97. Under certain double tax
the threshold for taxation (€ taxable base for the IFI are treaties addressing wealth tax,
1,300,000), the tax brackets significantly reduced; only citizens of certain countries
and the definition of taxpayers non-professional real estate are fully exempt from IFI tax
subject to the tax remain property is taxable, leading to on non-French assets for the
unchanged compared to the the exemption of financial first five years of their
rules applicable to the ISF. assets (notably cash, stock and residence in France.
Similarly, the flat 30% equity) and moveable assets.
reduction applicable to the 98. Under French domestic rules,
In parallel, the rules regarding if an individual arrived in
value of a principal residence the exemption of professional
is maintained. France after 6 August 2008
assets are redefined and re- and was regarded as a non-
93. The five-year exclusion of centered on real estate. French tax resident for the 5
assets located outside of 95. Rates are progressive from years preceding his arrival in
France from the taxable base 0.50%, after an allowance of France, his real estate assets
for new French tax residents €800,000 to 1.5% for net located outside of France are
Global Mobility Country Guide (Folio) 21exempt from IFI until 31st Considering the specificities of sought at the earliest possible
December of the fifth year this regime, we recommend stage.
following the year of arrival in that professional advice be
France.
3% annual property is therefore no income tax or to grants of qualifying free
tax social security due upon shares. A free share plan is
exercise with the exception of qualifying if certain corporate
99. Any company based in France the “excess discount” (grant law requirements are fulfilled.
or abroad which directly or price less than 95% of the Otherwise, it is considered as
indirectly owns property located average price over the 20 additional compensation and
in France which is not involved trading days preceding taxed as such. Please note that
in an industrial or commercial the grant). the timing of taxation as well as
activity falls within the scope of the tax regime will be different.
the annual 3% property tax. The excess discount (over the
authorized 5%), if any, would be For “French Qualified” free
Companies may benefit from an subject to taxation as additional shares, the taxation of the
exemption by fulfilling certain compensation and would be acquisition gain is due the year
requirements, e.g., an annual offset against the taxable basis of the sale.
return or a commitment to of the subsequent taxable
provide the French tax acquisition gain. Grant of “French Qualified”
authorities with information free shares: the grant of free
concerning the property and 103. Stocks disposal: a distinction shares to the beneficiary
their shareholders. depending on the date of grant remains exempt from French
should be made to determine personal income tax as well as
Stock option plans the tax and social security French social security
treatment applicable to the contributions.
100. French law provides a specific
acquisition gain (i.e., the
tax and social security Vesting of the “French
difference between the fair
treatment of qualifying stock Qualified” free shares: the
market value of the shares at
subscription or purchase taxable event is deferred upon
the date of the exercise and the
options on both French and the time of sale of the
option price). The capital loss,
foreign stocks. underlying shares. There is
if any, is deductible from the
acquisition gain. Please see therefore no income tax or
A stock option plan qualifies in
table below summarizing the social security due upon the
France if certain corporate law
applicable tax and social rates. vest date of the free shares.
requirements are fulfilled.
Otherwise, it is considered as Stocks disposal: A distinction
The capital gain (i.e., the
additional compensation and depending on the date of grant
difference between the sale
taxed as such. Please note that and on the date the
price and the fair market value
the timing of taxation as well as shareholders approved the
of the shares at the date of
the tax regime will be different. grant (especially to benefit from
exercise) to a 30% flat tax rate
(including social surtaxes). the “Macron” regime) should be
101. Grant of “French Qualified”
Please refer to paragraph 30. In made to determine the tax and
options: the grant of the option
addition, exceptional surtax on social security treatment
to the beneficiary remains
high level income may be due if applicable to the acquisition
exempt from French personal
applicable. gain (i.e., the fair market value
income tax as well as French
of the shares at the date of vest,
social security contributions.
Free grant of shares less deduction of the capital
102. Exercise of “French Qualified” AGA loss if any). Please see table
options: the taxable event is below summarizing the
deferred upon the time of sale 104. Specific personal income tax applicable tax and social rates.
of the underlying shares. There and social security rules apply
22 People and OrganisationThe capital gain (i.e., the subject to a 30% flat tax rate high level income may be due if
difference between the sale (including social surtaxes). applicable.
price and the fair market value Please refer to paragraph 30. In
of the shares at the date of vest) addition, exceptional surtax on
Applicable tax and The rates are applicable to As in many countries, the
social rates for French tax residents subject to taxation of stock options and
French social security on a free grant of shares in France is
“French Qualified” mandatory basis at the date of very complex and requires
stock-options and free grant for the employer’s part specific advice from a tax
shares and/or at the date of sale of the advisor.
shares for the employee’s part.
The rates mentioned above do
Due to the complexity of the
not take into account the
system, the below table
exceptional contribution on
summarizes, for information
high income of 3% and 4%.
purposes only, the applicable
social and tax rates.
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