Tax Year: Calendar Year i.e. Jan-Dec
Currency Code: EUR
Currency Symbol: €
Currency Name: Euro
Pay Frequency: Monthly
Language: French
Capital: Paris
Prime Minister: Edouard Philippe
Introduction
France is known the world over for its cuisine, fashion, culture and language. It is most visited tourist destination in the world. France is the second-largest country in Europe (after Russia). Much of the country is surrounded by Mountains. The highest mountain, Mount Blanc, is near France’s border with Italy. The Climate and soil of France create good conditions for farming. The baguette, a long, thin loaf of crusty bread, is the most important part of French meal.
Tax System in France
Personal Income Tax is applied on wages, salaries, compensation including director salary, pension, annuities and benefit in kind. The authorities calculate the personal income tax on the basis of the amounts declared by taxpayers, who are required to submit a single return per tax household reporting all the income received in the previous tax year. The calculation of income tax takes the personal situation into account. The income tax calculation is adjusted to personal circumstances inter alia, by means of an income splitting system and by allowing taxpayers tax reductions or credits for certain personal expenses.
What is Income Splitting?
Income Splitting is a way of taking dependents into account and, accordingly, to cushion the efforts that effects taxation by applying the progressive rate to a partial income, namely taxable income per part.
In easy language à
The method involves dividing the tax household’s taxable income into a certain number of parts
I.e. One part for a single person,
Two parts for a married couple,
An addition half-part for each of the first two dependent children and
An additional part for each dependent child thereafter
The progressive tax scale is then applied to taxable income per part. One part arrived is then multiplied with the number of parts to determine the gross amount of tax payable.
The next step after determining the gross tax is to deduct any tax reductions and tax credits for which the taxpayer may be eligible, subject to overall cap on tax breaks.
In summary, personal income tax are not withheld on payslip. They are directly paid by each employee to the state at the end each tax year.
Social Security
There are two types of social security contributions. The general social security contribution (CSG: Contribution sociale generalisee) and social security debt repayment contribution (CRDS: Contribution pour le remboursement de la dette sociale).
· CSG
The general social security system is a levy with a social purpose. Unlike social security contributions, which entitle those who pay them to benefits, the CSG is levied like any other tax without any direct benefit in return. The contribution is levied on individual who are domiciled in France for tax purposes.
· CRDS
The CRDS is intended to clear the defects of the social security system. The tax base is slightly wider than that of CSG since certain categories of income exempt from CSG, such as family allowances and housing benefits, are liable to CRDS. The CRDS is collected in same way as CSG, with the exception of the contribution on earned and substitution income from foreign sources collected by individual assessment.
The tax administration characterizes CSG/CRDS as an income tax for domestic purposes.
The CSG contributions are exempt from PIT contrary to CRDS which is not. CSG is charged at a rate of 7.5%, of which 5.1% is deductible for French income tax purposes.
Levies cover:
o Training
o Transport
o Apprenticeship
o CSG
o CRDS
Some levies are often grouped under the heading Other Employers Deductions on the pay slip.
More Social Security Schemes:
· URSSAF: These are regular contributions paid by both the payee and employer to cover retirement, sickness, workplace accidents, family benefits, widows’ benefits, and FNAL [Calculation rule = percentage * base]. There are different classes and calculation differs as per categories.
· POLE EMPLOI ex ASSDIC: Contributions are paid to the state unemployment fund (UNEDIC), which finances unemployment insurance and salary guarantees.
· Pension Plan: Complementary and Mandatory pension schemes for all salaried employees and executives
Deductions and relief
· Expenses incurred in the acquisition of earned income are normally taken into consideration on a notional basis (a 10% deduction capped and reviewed each year). However taxpayers may opt to deduct the actual amount of their professional expenses, subject to the production of vouchers.
· Pensions and annuities without consideration are eligible to 10% special relief.
· Family allowances and health care reimbursements
Expat Taxation
Non-residents are subject to a withholding tax on French-source remuneration, after the deduction of statutory employee social security contributions and the 10% standard deduction.
Where income has been subject to double taxation relief can be granted by the French Revenue Authority, where provided for in the relevant double taxation treaty.
Comments
Post a Comment