The French tax year is the calendar year (1 January to 31 December). Tax returns and payments are made in the year following the tax year, so for the tax year 2008, returns and taxes due have to be made during 2009. French residents have to file their tax returns by 31 May 2009 for paper returns or between 13 June and 27 June 2008 for internet filing, depending on the place of residency. Non-resident income tax returns have to be filed by 30 June 2009 if the individual is resident in Europe.

You can choose whether to pay in three equal instalments or by 10 monthly instalments from January to October. If paying by instalments, they must be made on 15 February and 15 May, each equal to one third of the amount of the previous year’s total income tax. The actual assessment will be received, usually in late summer or early autumn, when the final payment is due by 15 September. In your first year as a resident, income tax is not usually due until the September of the year following your arrival, since no February or May payments are required. You will have to make yourself known to the tax authorities as they will not automatically send you a tax return until you are in the tax system. Resident taxpayers will have to deal with their local hôtel des impôts. Non-residents should contact the Centre des Impôts des Non- Résidents (CINR), TSA 10010, 10 rue du Centre, 93465 Noisy-le-Grand Cedex. The main income tax return is Form 2042. If you are already in the tax system, it will already contain your name and address and details of earnings. Form 2041-E is for non-residents plus there are supplementary forms as required. Capital gains from the sale of real estate is declared on Form 2048 IMM. The capital gains tax due is calculated by the notaire and withheld at the time of sale. The notaire will then remit payment of the tax, together with Form 2048 IMM, within two months from the notarised deed of sale.

Local tax office

Wealth tax returns should be submitted by 16 June for French residents, 15 July for residents of other EU countries (including Monaco) and 1 September for residents of countries outside the EU. Payment must also be made by the relevant date. Residents of France submit returns and payments to their local tax office, and all others must submit their returns and payments to: Recette des Impôts des Non-Résidents, 10 rue du Centre, TSA 50014, 93465 Noisy-le-Grand Cedex. Residents are taxed on the income for the entire household. The family is divided into a number of parts familiales and the total income is then divided by the number of parts. The income tax scale rates are then applied to this lower figure, and having computed the income tax due, it is multiplied by the parts to provide a larger number. This avoids higher tax rates on a high income where there is more than one member of the household. There are various tax credits available, which are deductible against the tax to be paid. Married couples or unmarried couples who have registered as PACS (pacte civil de solidarité) are entitled to the parts system. Where the marriage or PACS is entered into during the tax year, three tax returns must be completed: one each for the period of the tax year falling before the marriage, and one joint household return for the portion of the French tax year falling after the marriage. A couple who are not married or have not entered into a PACS will be taxed as separate households. The minimum tax rate for non-residents on French source income earned is 20 per cent, and withholding tax of 20 per cent is applied at source to any French salary received by a nonresident of France.

Worldwide income

However, non-French residents may choose to apply the French scale rates of income to their worldwide income in order to establish the effective tax rate on the income (known as the taux effectif). The tax liability is calculated on the worldwide income as if they were a French tax resident, but then the proportion of the tax liability related to the income that is not subject to French taxation is then discounted; eg if your French rental income represents say 10 per cent of your worldwide income, and your French tax liability calculated under the scale rates of tax is say €4,000 (£3,714), then €3,600 (£3,343) would be discounted under this scheme and only €400 (£371) would be taxable. If the tax calculated under the 20 per cent rule is say €500 (£464), the scale rates would produce a lower tax liability and would thus be to your advantage (although the income will probably also be taxed in your home country, with an offset available for any French tax paid, in order to avoid double taxation).

French bank interest is subject to a final and fixed withholding tax of 18 per cent plus 11 per cent social charges (increased to 12.1 per cent from 2009). Bank interest received from a UK account (or from any other EU country) can also receive the same treatment, but in order to receive this treatment, you must make the election, by completing Form 2778-SD each time interest is paid. Otherwise, where no election is made, the usual scale rates will apply. Details of all non-French bank accounts opened, closed or used in the year must be declared to the French tax authorities (even if no income was received into any of these accounts) on Form 3916 each year. The penalty for failure to so declare is €750 (£696) per undeclared account. Where dividends are received, you have the option of electing for dividends to be subject to a final and fixed withholding tax rate of 18 per cent (plus 11 per cent social charges) with no deductions or abatements, or for the usual scale rates to apply with the relevant deductions and abatements. S

ocial charges are another form of tax and are paid by residents of France. The rates are 11 per cent on investment income (increased to 12.1 per cent from 2009) and capital gains, 8 per cent on earned income and 7.1 per cent on pension income. Holders of Forms E106 and E121 are exempt from French social charges on their UK pension income. Social charges are calculated based on the income declared in your tax return. Taxpayers will be sent notification (avis d’imposition) of the amount payable in the autumn following the submission of your tax return. A proportion of the social charges paid on income taxed at the progressive scale rates is tax deductible and the deductible portion of the social charges will be deducted from your taxable income for 2009 for which tax returns and payment are due in 2010. French tax can be complex and it would be worthwhile to use the services of an accountant, especially for your first return, who is experienced in dealing with expatriate tax issues and the local tax offices. A tax adviser specialising in UK and French tax systems may also help you to minimise your French tax liability.