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Taxes in France: What do you need to know?
Discover the ins and outs of the French tax system. Find out all you need to know about taxes in France. And tax benefits too!
Residing in France sounds very nice. In addition to its many cultural attractions and excellent cuisine, it’s one of the countries with the best public services in the world. But before you pack your bags to enjoy its famous savoir-faire, you should consider something that doesn’t appear in the guidebooks: The tax burden you’ll face is also one of the highest in Europe. At first glance it may sound a bit daunting. But it’s precisely thanks to taxes in France that you can enjoy a strong welfare state, with quality health, education and infrastructure.
If you’re thinking of moving to Paris, Lyon or any other French city, this article will be of interest to you. Let’s break down, point by point, what taxes you’ll have to pay once you are there. Also those you would have to face if you decide to set up a company and the tax advantages you might be eligible for. Want to find out if moving to France is good for your finances? Join us to find out.
Taxes for individuals or natural persons in France
Before getting into the subject, let’s talk about something that defines France: Its balance between rights and obligations. As mentioned above, the Gallic Republic has a robust tax system that finances one of the most comprehensive welfare states in the world. But, of course, you have to pay for that. Such a level of service comes at a price and it’s best to take this into account before taking the final step and settling in.
The French tax system combines direct taxes, such as income tax, with indirect taxes, such as VAT or local taxes. How much will you pay? This’ll depend on your income, the value of your property or whether you decide to settle permanently. Let’s take a look at the main taxes affecting individuals, so you have a clear picture of your obligations and how they fit into your life in France.
1. Income Tax (IT)
Personal Income Tax (IRPP) is probably the most relevant to your finances if you decide to move to France. This progressive levy applies to the overall income of all tax residents in the country. In other words, the more you earn, the higher the percentage you pay. It’s the cornerstone of the French tax system and one of the most important factors in your annual budget.
The IT is designed with a focus on tax equity. The aim is to ensure that those with higher incomes contribute more to the financing of public services. How is it calculated? By tranches. For 2024, the applicable brackets and rates go as follows:
- Up to €11,294 ($11,739.15): 0% (exempt).
- From €11,295 ($11,740.19) to €28,797 ($29,932.02): 11 %.
- From€ 28,798 ($29,933.06) to €82,341 ($29,933.06): 30 %.
- From €82,342 ($85,587.48) to €177,106 ($184,086.56): 41 %.
- More than €177,106 ($184,086.56): 45 %.
Let’s look at a practical example, which always makes things clearer. Let’s say you have an annual income of €40,000 ($41,576.58). This would break down the tax calculation for you:
- First tranche: 0% on €11,294 ($11,739.15): €0 ($0).
- Second tranche: 11% of €17,503 ($18,192.87), i.e. €28,797 – 11,294 ($29932,02 – 11739,15): €1,925.33 ($2,001.22).
- Third tranche: 30% of €11,203 ($11,644.56), i.e. €40,000 – 28,797 ($41,576.58 – 29,932.02): €3,360.90 ($3493,37).
Total to be paid: €5,286.23 ($5,494.58).
In addition, if you have dependants or are married, France uses the system of “tax shares”, which adjusts the tax calculation so that you pay less, depending on the number of dependants.
2. Value Added Tax (VAT)
Another tax in France that’ll directly affect your daily economy is the Value Added Tax (VAT). This is an indirect tax that individuals pay each time they consume goods or services. It’s included in the final price of most products, from clothing and technology to restaurant bills and public transport fares.
VAT is one of the pillars of the French tax system, one of the largest sources of revenue for the State. With an overall rate of 20 %, it’s one of the highest in Western Europe, but is somewhat lower than in other countries such as Hungary, which has a standard VAT rate of 27 %. Or Denmark and Sweden, which apply 25%. However, the rates applied vary according to the type of product or service:
VAT rates:
- 20 %: General (clothing, technology, transport, etc.).
- 10 %: Reduced rate (hotels and catering, passenger transport).
- 5.5%: Super reduced rate (basic foodstuffs, books).
- 2,1 %: Specific rate for reimbursable medicinal products.
3. Property Tax (Taxe Foncière)
If you decide to buy a property in France, you’ll have to pay property tax, known as Taxe Foncière. It’s a local tax, calculated on the basis of the rateable value of the property and the rates set by each municipality. This is a recurring tax, which you’ll have to pay every year for as long as you own the property.
How much is paid? The percentage varies from region to region, ranging from 0.1% to 1% of the rateable value of the property. This value, estimated by the administration, may be lower than the market price, making the burden more bearable. It’s a tax in France to be taken into account if you’re buying a property, especially because it varies according to the location and infrastructure of the area.
For a property with a rateable value of €200,000 ($207,882.92), the annual tax could be between €200 ($207.88) and €2,000 ($2,078.83). If this property were in Paris, where the rate in 2024 was 20.5%, you would pay around €1,025 ($1,065.40). In contrast, in rural areas or smaller municipalities, the tax burden could be considerably lower.
4. Other important taxes in France
In addition to those mentioned above, there are other taxes you should be aware of if you plan to reside or invest in France. They mainly affect owners of real estate, inheritance or second homes:
- Real Estate Wealth Tax (IFI): This tax replaces the former general wealth tax and applies exclusively to real estate whose net value exceeds €1,300,000 ($1,351,238.98). It’s progressive, with rates varying from 0.5% to 1.5%, depending on the wealth bracket.
- Local taxes (Taxe d’Habitation): Although this has been phased out for first residences, it’s still in force for second residences. The rate varies according to the municipality and can be up to 20% of the rateable value of the property.
- Inheritance and donation taxes: France taxes both inheritances and donations. Fees depend on the degree of kinship. For children and spouses, they range from 5% to 45%. For distant or unrelated relatives this can be as high as 60%.
Taxes for legal persons or companies in France
Let’s now look at the tax landscape for companies in France. If you’re planning to open a business in France or expand your company there, it’s important to understand how the tax system works. France has a reputation for being one of the highest taxed countries. However, this comes with a number of benefits, such as access to international markets, a solid infrastructure and a very interesting entrepreneurial ecosystem.
1. Corporate income tax (Impôt sur les Sociétés – IS)
Corporate income tax is the main tax for companies in France and one of the most important taxes. This tax is levied on the net profits of companies. That is, the amount remaining after deducting all operating expenses, salaries and other costs associated with doing business.
The rate in France is one of the most balanced in the European Union. Especially when considering the tax deductions and benefits that can be applied.
- The standard rate is: 25 % of net profits.
- Reduced rate: 15% is applied on the first €42,500 ($44,175.12) of profits for companies with annual revenues of less than €250,000 ($259,853.65).
Let’s say, for example, that you have a company that generates around €300,000 ($311,824.38) of net profit per year, the tax calculation would be as follows:
- The first €42,500 ($44,175.12) are taxed at 15%, equivalent to €6,375 ($6,626.27).
- The remaining €257,500 ($267,649.26) are taxed at 25%, totalling €64,375 ($66,912.31).
Total to be paid: €70,750 ($73,538.58).
If we compare the rate of this tax in France with countries such as Germany or Italy, where effective rates can exceed 30 %, France is more accessible to companies. However, it isn’t as attractive as Ireland, which continues to lead with remarkably low rates (12.5%).
2. Value Added Tax (VAT) for businesses
VAT also affects companies in France, as they have to collect this tax from their customers and then transfer it to the State. Although the cost is borne by final consumers, businesses have an important role to play in managing the cost.
- The standard rate is: 20 % (clothing, technology, general services).
- Reduced rate: 10 % (hotels, passenger transport).
- Super reduced rate: 5.5% (basic foodstuffs, books).
- Specific rate: 2.1% (reimbursable medicines).
Businesses can deduct input VAT on the purchase of goods and services related to their activity, which reduces the actual tax burden.
Imagine that your company sells a product for €1,000 ($1,039.41). You’ll add a VAT of 20 %, €200 ($207,88), which you’ll then have to transfer to the State. If you bought that product from a supplier for €800 ($831.53)+ VAT (€160 – $166.31), you’ll be able to deduct that input VAT, transferring only the difference, €40 ($41.58).
3. Employer’s social contributions
In France, companies are also obliged to pay social security contributions on their employees’ salaries. These contributions finance services such as public health care, unemployment insurance and pensions.
- Average rate: Contributions represent about 45% of the employee’s gross salary.
- These rates vary according to the type of company, size and wage level.
4. Other important taxes for businesses
- Tax on economic activities (CFE and CVAE): Affects companies according to their turnover and location. Fees are determined by each municipality.
- Environmental taxes: Depending on the sector, companies may be subject to carbon or waste taxes.
- Taxes on advertising: If your company uses advertisements in public spaces, you’ll be subject to a specific tax depending on the region.
Tax benefits in France
Despite its demanding tax regime, France strives to encourage investment, job creation and highly qualified people to reside in the country. It does so through a number of tax benefits that can ease the tax burden considerably. If you’re thinking of moving, be sure to study the different advantages available to optimise your declaration.
Tax benefits highlighted in France:
- Tax regime for expatriates: France offers foreign workers a special tax regime called “Exonération des primes de mobilité” (Exemption from mobility premiums). This benefit allows part of the income earned during the first 8 years of tax residence in the country to be exempt from taxation. Very useful for employees of multinationals relocating to the country.
- Tax credits for innovative companies: Companies carrying out research and development (R&D) projects can benefit from a Research Tax Credit (RTC). It allows up to 30% of R&D expensesto be deducted, up to a limit of €100,000,000 ($103,941,460), providing an incentive for innovation.
- Exemptions in economic interest areas: Companies operating in regions with high unemployment rates can benefit from reductions in corporate taxes and local contributions during the first years of activity. This programme aims to boost local economies and generate employment.
- Deductions for real estate investment: Individuals who invest in rental property under certain programmes (such as the “Pinel Plan”) are eligible for significant tax deductions of up to 21% of the value of the property spread over several years.
- Benefits for start-ups and small businesses in France: France encourages entrepreneurship with tax breaks during the first years of activity for start-ups. The JEI (Jeune Entreprise Innovante) programme reduces social charges and offers tax benefits for companies that meet certain innovation criteria.
- Reductions in business inheritances: Transfers of family businesses enjoy a more favourable tax regime, with partial exemptions up to 75% of the value of the business. However, provided that certain requirements are met, such as maintaining the activity for a minimum period of time.
- Tax exemption in urban free zones: Some urban areas, known as “ZFU-TE” (Zones Franches Urbaines – Territoires Entrepreneurs), offer full tax exemptions for the first 5 years of business activity.
As you can see, with its strong welfare state and strategic location in Europe, France offers both challenges and opportunities from a tax perspective. Although its tax system may seem demanding at first glance, the benefits and exemptions available to individuals and businesses largely offset the tax burden. It’s a complex issue, so don’t hesitate to consult an expert to study your case and assess what is best for you. And don’t forget to get your Holafly eSIM to stay connected at all times!
Frequently Asked Questions about taxes in France
Tax declaration in France is done on an annual basis. Generally, the declaration period is open between April and June. The exact date depends on where you live and whether you file the return in physical or digital format. It’s important to meet deadlines to avoid late fees.
If you don’t comply with your tax obligations in France, you could face financial penalties ranging from 10% to 40% of the amount due, depending on the delay. In addition, in cases of serious or prolonged non-compliance, you could face interest for late payment and even legal action. Keeping up to date is key to avoiding complications.
Tax residents in France must declare and be taxed on their global income, regardless of where it’s generated. On the other hand, tax non-residents are only taxed on income generated within France, but may face higher rates in some cases. Are you a digital nomad in Paris or another French city? Your tax status will depend on the length of your stay and other factors, such as whether you have a main residence in France.
If you work remotely for a foreign company and don’t have clients in Finland, you may not be subject to local taxation. However, if you have income from activities in France or property in France, you’ll be taxed on it. Consider looking into the digital nomad visa in France to formalise your situation.
The best banks in France, such as BNP Paribas, Crédit Agricole and Société Générale offer bank accounts adapted to freelancers and expatriates. These include tools to manage invoices, savings and taxes. They also have options to simplify international payments, ideal for digital nomads and remote workers operating in multiple currencies.
Yes, France offers a special regime for expatriates called “Exonération des primes de mobilité” (Exemption from mobility premiums), which allows exemptions on a part of the income for the first 8 years of tax residence in the country. This can be a key advantage if you plan to move for work purposes.
If you buy a property in France but don’t reside there permanently, you may be subject to local taxes, such as Taxe Foncière and Taxe d’Habitation. In addition, if you rent out the property, you must declare the income generated.
