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Taxation in France: Comprehensive Guide

Taxation in France

Updated on Thursday 16th May 2024

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Taxation in France
 
Taxation in France applies to any company incorporated in this country or any foreign company managed and controlled from France. Residents and non-residents are taxed on their income derived from activities performed in France. French residents with a foreign-source income are generally not taxed. The most important types of legal entities that are subject to taxes in France are the joint stock company, the limited liability company, the commercial partnership and the branch. Our French lawyers provide complete assistance and accounting services for your business in France.
 
 
 Quick Facts  
Taxes for companies in France

- corporate income tax,

- social contributions related to employment,

- VAT,

- withholding taxes,

- customs duties,

- excise duties, etc.

Individual taxation in France

- personal income tax,

- social contributions,

- capital gains tax,

- inheritance tax,

- wealth tax,

- property taxes, etc.

Corporate income tax in France

25% with a surtax of 3.3%. The surtax applies only to the portion of corporate tax due that exceeds 763,000 euros.

Corporate income tax for SMEs

15% on profits up to 42,500 euros

VAT rates

- 20% (standard);

- 10%, 5.5%, 2.1% (reduced)

Personal income tax

Progressive rates, from 0% to 45%. Note that surtaxes are applied to high-income earners.

Tax year in France

From 1st January to 31st December

Number of double taxation treaties

101 (approx.)

Wealth tax (IFI) rate

Progressive rates, from 0.50%  to 1.5%. Our lawyers can provide more details on the wealth tax.

Withholding tax (WHT) Not for French residents
Tax residency in France

If France is your permanent residence or if you spend over 183 days in a year in France. Our attorneys can help you with tax residency.

Corporate taxation system

All companies are subject to taxation on the income they generate within France.

Tax minimization tools

- tax planning strategies,

- tax treaties,

- deductible expenses,

- charitable donations,

- reduced CIT for SMEs, etc.

Tax credits and incentives

- Research and Development (R&D) Tax Credit,

- Green Industry Tax Credit (C3IV),

- Patent Box Regime,

- Collaborative Research Tax Credit (CICo), etc.

Assistance

Our law firm offers expert guidance on tax planning, audits, international tax issues, and dispute resolution with tax authorities.

 

Corporate taxation in France

 

There are several taxes in France a company must pay. These are:
 
  • the tax on profits, also known as the corporate tax;
  • the business tax;
  • the social surcharge;
  • the social contributions related to employment;
  • the value added tax;
  • withholding taxes.
French companies are taxed based on a territorial basis. Generally, profits earned by French companies from business activities conducted abroad are not subject to taxation in France. 
 
The standard value of the corporate income tax in France is 25% with a surtax of 3.3%, resulting in an effective tax rate of 25.8%. The surtax is levied on the portion of the corporate tax due that exceeds 763,000 euros. However, the surtax does not apply to companies with a turnover lower than 7.63 million euros if at least 75% of the company is owned by individuals or by a company.
 
For small and medium-sized enterprises (SMEs), there is a specific corporate income tax in France. Specifically, SMEs in France are subject to a reduced corporate tax rate of 15% on profits up to 42,500 euros and a standard rate of 25% on profits exceeding that threshold.
 
To determine if your business qualifies as an SME, you can seek assistance from our lawyers in France
 
Interests and royalties and not subject to withholding tax in France. Dividends paid by a French company to a non-resident shareholder are subject to a 30% withholding tax. Dividends paid by French companies to a qualifying EU parent company are exempt from the withholding tax. A participation exemption applies in France under certain conditions.  Other taxes in France applicable to companies are:
 
  • the capital duty,
  • the payroll tax,
  • the real property tax,
  • social security contributions and others.
Foreign companies conducting business activities in France follow the same French corporate tax regulations and must comply with VAT laws. France offers a participation exemption for dividends and capital gains. Also, controlled foreign companies and thin capitalization regimes apply. France has signed double tax treaties with more than 100 countries worldwide. 
 
Our lawyers in France can offer you a complete and detailed list of the applicable taxes in France for any kind of business in France. Below is an infographic about the main taxes in France:
 
5 important taxes in France
 

Other taxes in France

 
Stamp duty, customs and excise duties and environmental taxes, as well as other taxes, can apply to companies in France. Our team of experienced lawyers in France can give you more details about the taxation in France for your company, depending on the business field in which you operate.
 
Foreign companies can open a branch in France and this type of company is generally ineligible for tax breaks. Branches are taxed on the income generated in France. 
 
Apart from branches, foreign companies in France can also open liaison offices in France, that is allowed to hire employees, but it is not engaged in commercial activities. The liaison office has the advantage that it does not have to pay the usual taxes. However, it must pay social security for its employees.

 

Personal taxation in France


French residents are taxed on their worldwide income and non-residents are taxed only on their French source income. Any individual who has the primary residence in France is considered a French resident. Married couples in France can file a joint tax return. The taxable income for individuals in France includes:

 

  • the employment income,
  • business income,
  • real-estate income,
  • investment income.
  • capital gains.
 
The income tax rates in France are progressive, from 0% to 45%. Additionally, there are surtaxes applied to high-income earners. A 3% surtax is imposed on the portion of income exceeding 250,000 euros for a single person and 500,000 euros for a married couple. Furthermore, a 4% surtax is applied to income surpassing 500,000 euros for a single person and 1 million euros for a married couple. This is a short insight into the progressive taxation system in France
 
The tax year in France is generally the same as the calendar year. Income tax returns must be filed by the end of May, for the previous tax year. Penalties apply for late filing.
 
For more details, it is recommended to discuss with our attorneys in France.
 

VAT in France

 
The value added tax (VAT) in France has a value of 20%. It applies to the sale of any types of goods and services. However, certain reduced rates apply: 
 
  • 10% reduced rate applied to various items including: some foodstuffs, certain non-alcoholic beverages, pharmaceutical products, cultural services, hotel accommodation, etc.;
  • 5.5% reduced rate to some foodstuffs, certain non-alcoholic beverages, books, admission to cultural events, etc.;
  • 2.1% reduced rate for certain pharmaceutical products, newspapers, etc.
 
Certain goods and services are exempt from VAT. The zero VAT rate applies to intra-community and international transport. However, VAT exemption does not include road and inland waterways transport.
 
VAT registration is required for companies in France. This is one of the most important taxes imposed in this country, so extra attention is needed. The registration for VAT is not a complex procedure, yet, it is required to have the legal support of a French team of lawyers. The supply of goods worth less than EUR 34,600 is not subject to VAT in France. Yet, the Register of Commerce and Companies in France and particularly the Chamber of Commerce, issues the SIRET number (the VAT code in France) under certain conditions, one of them being related to the VAT representative of the company in France.
 
As soon as the VAT registration is made, and the SIRET number is released, the enterprise can activate on the market and issue invoices. All you need to know about the VAT registration and tax in France for non-residents can be solicited from our French attorneys
 
Non-EU businesses selling goods or services in France are required to appoint a fiscal representative. Non-EU businesses are also required to complete the VAT registration and returns. This fiscal representative is responsible for ensuring accurate VAT submissions on behalf of his/her non-EU clients. If you need assistance in that matter, our law firm in France can provide fiscal representation. You can benefit from complete legal advice and guidance, starting from the beginning of your business formation in France.
 

The capital gains tax in France

 

Both companies and individuals are also subject to the capital gains tax which is a levy imposed on the sale of shares (in the case of companies), land and other types of properties, such as buildings.  
 
Capital gains from the sale of securities are subject to a tax rate in France of 30%, consisting of 12.8% for income tax and 17.2% for social levies, with an additional exceptional income tax for high earners, if applicable. Taxpayers with low income may opt for capital gains tax at progressive income tax rates.
 
Capital gains tax on real estate properties varies based on several factors, including whether the property was a principal residence, secondary residence, or other property, and the holding period. There are exemptions for certain types of real estate capital gains, but it is advised to consult our lawyers in France for details. 
 

The wealth tax in France

 

Another tax that must be taken into consideration in France is the wealth tax. This levy is payable only for assets worth more than 1,3 million euros. Foreign citizens will be subject to this tax only after 5 years of residence in France. The wealth tax is levied at progressive rates which range between 0.50% and 1.5%. Our lawyers can help you with information about taxation in France.

 

Taxation of non-residents in France

 

Non-residents are liable to pay taxes on the incomes generated in France only. The income tax applicable to foreigners with earnings in France is set at a rate of 20%. With respect to foreign companies paying taxes in France, these will be imposed the same rates as for local companies. However, in order for double taxation to be avoided, France has signed numerous tax agreements through which the elimination of double taxation occurs.

 

Can I choose tax minimization methods in France?

 
Yes, there are tax minimization methods available for companies in France. With the help of our French lawyers, business owners can benefit from a series of strategies and cut the taxes they need to pay in France. The main target of tax minimization methods in France is to reduce the taxation on income, as much as possible, by using the legal opportunities. For instance, the airline tickets, office supplies, fees of directors in France, repairs related to properties, and employee bonuses are the types of expenses that can be considered for tax minimization in a firm in France. Particular tax deductions can be adopted in a form, depending on the business structure. Using the capital gains discount is another tax minimization tool for which you can ask for information. Also, a correct tax planning strategy can be implemented with the help of our specialists in this field. Feel free to discuss all the terms with one of our lawyers in France. They can give advice on tax in France for non residents.
 

FAQ about taxation in France

 
1. What is the corporate tax in France?
25% with a surtax of 3.3%, resulting in an effective tax rate of 25.8%. The surtax applies only to some companies. There is a reduced rate for SMEs of 15%, under certain conditions. 
 
2. What are the main taxes a company in France must pay?
The corporate income tax, social surcharge, the VAT, the business tax, the withholding tax ad the social contributions enter the attention of companies with activities in France. Other taxes are applicable too.
 
3. Is the withholding tax imposed on interests and royalties in France?
No, there is no withholding tax imposed on royalties and interests paid in France.
 
4. Do I need to pay taxes for a liaison office in France?
One of the benefits of a liaison office in France is that there is no need to pay taxes, due to the lack of commercial activities of this kind of entity.
 
5. How are natural persons levied in France?
Foreigners in France are taxed only on the income generated in this country, while nationals are levied on their worldwide income. A joint tax return is applicable to married couples in France. Feel free to ask about the tax in France for non-residents.
 
6. What type of income is taxable for natural persons in France?
The capital gains, employment income, real estate income, business income, and investment income are subject to taxation in France.
 
7. What is the VAT rate in France?
France imposes a VAT rate of 20% on the supply of goods and services. There are lower VAT rates for medicines, food products, the supply of energy, etc. You can discuss with our team of French lawyers all the aspects of VAT, plus tax in France for non-residents.
 
8. What is the wealth tax in France?
The wealth tax is applicable to assets worth more than EUR 1,3 million. In the case of foreign residents in France, this tax applies after 5 years of living in France.
 
9. Do I need a representative for tax registration in France?
Yes, a representative for VAT registration in France is required. One of our lawyers in France can help you. They can also tell you about taxes in France for non-residents.
 
10. What is the income tax for foreigners in France?
The income tax imposed on foreigners in France is set at a 20% rate and it is applicable only on the income generated in this country.
 

Statistics about taxes in France

 
If you wish to discover more about the taxes in France, here are some statistics provided by the OECD about the tax revenue in the year 2021 in the country:
 
  • Taxes on income, profits, and capital gains amounted to 300,197 million euros from the total tax revenue in France;
  • Taxes on goods and services contributed 306,212 million euros to the total amount;
  • 95,693 million euros accounted for the taxes on property. We can give you more details on these taxes if you decide to buy a property in France;
  • 63,313 million euros were the total taxes from corporate income and gains. 
 
Please contact our law firm in France for more information about the taxes in France and filing requirements.