Income and wealth tax in France: a practical guide in 8 questions

Based on some concrete questions, below we will guide you through income tax (Impôts sur le Revenu or IR) and wealth tax in France (Impôt sur la Fortune Immobilière or IFI), in the perspective of a non-resident and a resident:

1. What are the deadlines for (online) returns?
2. In which cases, as a non-resident, should you file a French income tax return? 
3. What exactly must be declared as a French resident?
4. How do I declare income arising from furnished rentals?
5. What are the applicable rates for French income tax?
6. What exactly does the wealth tax, Impôt sur la Fortune Immobilière/IFI, entail? 
7. How is the IFI calculated correctly?
8. What rates apply for the IFI?
    

Income 2023 returns have different deadlines. The returns are done through an online portal that has been open since 11 April 2024. In principle, paper returns can only be filed when it comes to filing an initial return. After that, returns are compulsorily done through your personal account on the online portal.

For income 2023, the deadlines are as follows:            

• For non-residents: 23/5/2024

• For residents: 

  • department 1 - 19: 23/5/2024

  • departments 20 to 54: 30/5/2024

  • other departments: 6/6/2024

The deadline for paper returns is fixed at 20/05/2024.

The assessment notice is in principle available from August 2024, a paper declaration may require a longer processing time. In the case of refunds, this takes place between mid-July and early August. In case of additional payment, the following calendar applies:

• if the balance is lower than 300€ : 26 September 

• in case of multiple payments : 26 September, 25 October, 25 November, 27 December

You must file such a return when there is taxable income in France, such as (among others):

• Rental income: both bare and furnished rental income must be declared in France

important: for furnished rentals, you are required to declare a French sole proprietorship

• Employment income: 

  • e.g. who works for a French employer in France but lives in Belgium must file a declaration in France regarding French income

  • e.g. someone who works for both a French and a Belgian employer (salary-split): the French income part is to be included in the declaration "Impôts sur le Revenu" in France. In principle, these pay slips would already have RAS (“retenue à la source”) and no PAS (“prélèvement à la source”) withheld.

• Income from French sole proprietorship

• Income from a translucid SCI

You are obliged to declare your worldwide income, in other words both French income and foreign income. In doing so, you must also analyse what is or is not taxed in France:

            e.g. pension: you must check where it is taxable

            e.g. rental income from non-French property (see below)

e.g. non-French moveable income such as interest, dividends, capital gains and losses on shares (portfolio)

Points to note for subsequent income, which you should not forget to include: 

• Declaration of foreign accounts and life insurance/ group insurance: 

every foreign account must be disclosed, if not, penalties of up to €1 500 per account per year can be claimed. Sometimes the French tax authorities are more aware of the accounts you hold, so bear this in mind!

• Revenue from solar panels in other words also the electricity you sell: you need to register a sole proprietorship for this.

• Of course also any donations and “crédits d'impots” (such as CESU, electric car charging stations, childcare,....) 

• A lot of deductions have been removed with regard to improvement works on the main residence: such as deductions for insulation works, double glazing, heat pumps,...

For income 2023 as “Loueur en Meublé Non Professionnel (LMNP )” with the "micro-fiscal" option, the following cost flat rate is applied:

Negotiations are currently ongoing on revenue 2024. We will keep you updated on this.

Also read our article on the compulsory declaration of real estate in France.

Income tax in France is subject to a progressive rate, see below:

This applies to residents. 

Non-residents can apply this rate if they declare their world income tax family. If not (when the world income tax family is not included in the French declaration), a 20% assessment is applied up to 28 797€ of taxable income. From higher income, 30% assessment applies. 

On top of this, social taxes ("prélèvements sociaux") must also be calculated, the rate of which is 7.5% or 17.2%.
 

The IFI is a tax on holding property, both directly (i.e. in private name) and indirectly (via company shares). The situation has to be looked at per tax family: an adult child - whether or not still dependent - constitutes a separate tax family for the purposes of the IFI.

For the non- resident, only French property (direct or indirect) is taken into account. For the French resident (= more than 5 years in France), both domestic and foreign property is taken into account. For a new French resident(=less than 5 years), during the first 5 years, only the French property is taken into account.

This tax should be calculated annually and the starting point is always the situation on 1 January of each year: concretely, for the tax return to be filed by May, one should look at situation on 1/1/2023.

IR and IFI returns are filed together. However, if there is no income tax but only wealth tax IFI, the IFI return is filed separately. The deadlines for the IFI are the same as those for IR.

To arrive at the taxable net value of the property, some adjustments are possible such as:

E.g. The deduction of a loan

Eg. A deduction as principal residence 

E.g. Any exemptions if it is professional property, for example

It is also important to note that not all debts incurred to acquire the property are deductible: 

• Restriction e.g. on bullet loans, intra-group/family loans

• Bank loan with periodic repayments taken out for acquisition of property or for financing major works in principle fully deductible 

The Loi de Finances 2024 has also introduced some additional changes with the intention of curbing abuses around IFI. 

After determining the net property assets and when they exceed the €1.3 million threshold, the IFI will apply.

If threshold is exceeded, IFI is calculated from €800K.

Following examples: 

• In the case of a non- resident, with net French real estate assets of 1.5 MIO€, then the IFI will be 3 900€ per year.

• In the case of a non-resident, with a net French property wealth of 2 MIO€, then the IFI wille be 7 400€ per year.