What are the conditions for paying tax in France?

If you live in France for six months or more of the year you are seen as a French tax resident. You are therefore liable to complete an annual self assessment return in France. You must declare all your income, whether earned in France or abroad. You will be required to complete an annual income tax return for the previous tax year i.e. 2007. The fiscal (tax) year in France runs from 1st January to 31st December.

If you are a UK tax resident, but have income created in France, for example from gîtes, you are liable to declare this to the French tax authorities.

What do I have to do when I move over to France?

The French and UK authorities give you a six month period to decide whether you wish to stay in France permanently. Normally after being here for six months you are required to officalize your French tax residency and you have to inform the French tax authorities that you are a French residing tax payer. This is done by completing the FD5 form. This form is sent by your local tax office to Paris and then passed on to the UK tax authorities. This can take several months for everything to fall into place. You can jump a step and send the form to HMRC office.

Tax residency

By completing an FD5 form, this allows certain incomes coming from the UK or other EU countries, to be taxable only in your country of residency i.e. in France and not in their country of source. For example private and state pensions should not be taxed in the UK. There are of course exemptions – for example for a pension by the UK for your service to the UK Government or a local authority or were employed in a publicly funded educational institution, where there are special provisions in the Double Taxation Convention. If you have several forms of income, it is best to talk to an expert to clarify your situation.

How do I declare my first year’s income in France?

When you make your tax declaration for the first year, do not forget that the French and UK tax years are not the same. The French system goes from the 1st January to the 31st December and the UK system from the 1st April to the 31st March. So if you move to France on the 1st July, you declare the income from the 1st April to the 1st July to the UK tax authorities and the income from 1st July to 31st December to the French authorities .

Foreign income already taxed abroad

This income will not be taxed again in France, but should be declared in your French tax return so that it can be assessed as part of your world-wide income by the French authorities.

Tax Categories

Income tax is on a banded system in a similar manner to the UK, and although the top rate is 40%, most households pay less in France than they would in the UK. This is because you are taxed as a household and all income is divided equally between the household with allowances and tax rates applied to each part.

A married couple living together in France will be considered as two parts for the purpose of French Income tax. Any children in household also have tax allowances (the first two dependant children each constitute half a part with the third and any subsequent children constituting a whole part). It is a great advantage in France to first married and then have several children at your charge.

Living in France, working in the UK

If your family lives in France - even if you as breadwinner do not spend more than half the year in France - you will be deemed as French tax resident, as you are resident where you main home is. This means that even though your UK PAYE earnings will remain taxed in the UK, you will still need to complete an annual self assessment return in France. UK earned income will normally remain subject to UK income tax in the first instance, and will use your normal UK personal tax allowances.

Tax Forms

If you have already been living here for a certain number of years the tax return forms (Déclaration des Revenus) should arrive in the post and by pre-completed. If you are an employee, it is simple, you just need to check that the information is correct, sign and send it within the time. If you have a business, you will need to complete the information with aid of your accountant, the tax office or by someone who understands the forms.

If however it is your first time, it is your responsibility to contact your local tax office (hôtel des impôts) to obtain the relevant forms or complete them online. The main tax form is Form 2042 which should include your world-wide income and gains.

If you have any income that arises outside of France you also have to complete form 2047 and perhaps 2042C if any income tax is paid on foreign investment income, as any bank interest - even if in the UK and in a cash ISA - is taxable in France.

Any UK PAYE earnings must be declared on your French tax return, although it is not actually taxed again. It is added to any other taxable income such as rental income or bank interest and applied at the appropriate tax rates. The income tax bill would be reduced by the proportion of your total household income that is made up by the PAYE earnings. For example, if your UK PAYE earnings made up 80% of the households taxable income, you would pay 20% of what your French tax liability would have been.

Crédit d’Impôts

I have previously written about a number of tax reductions or reimbursements that you can receive, do not forget to include them on the forms and supply the appropriate paperwork and bills. Do not forget that if you have had work done by an English tradesman, the bill must be in French and define the criteria that made you demand eligible. For example – isolation attic roofs – productivity of R 4,5 m² °K/W. There are a number of crédits d’impôts available, so look in to whether you can make the most of them. For further information you can look on the website www.service-public and search crédit d’impots