76 French Property News August 2019 http://www.completefrance.comI
n 2017 France had the dubious
honour of being the most highly
taxed nation in the world at
42.6% of GDP, beating Norway’s
46%. This was despite the fact that
French income tax rates were not
the highest.
It was not great news for Mr
Macron, but it was great press for
the gilets jaunes who used such
data to press for reform.
The issue is that calculating the
actual weight of taxation is a little
more complicated than this, since
many countries have allowances,
offsets and exemptions. When it
comes to these, France sets the
gold standard, with a plethora of
them, meaning that less than half
of all French households actually
pay any income tax at all.The parts system
The parts system is a fascinating
thing, which essentially splits
income between household
members, the allowances and
thresholds. So the more people inthe household, the more the
income is split.
One married couple is two parts
and then an extra half part for
each of the first two children and
from there on a whole part for
each child. It does not need to be a
big household to work well.
If we take a married couple, Mr
and Mrs Smith, of UK state
retirement age, where one is
receiving pensions of the
equivalent of €50,000 per year,
the UK tax would be around
€7,500 (depending on the
exchange rate used).
The mere act of moving to
France means that Mr and Mrs
Smith’s income tax bill reduces to
around €3,760. Yes, you are
reading that right, it is pretty
much half.
This is just one thing to point
out; there are so many rules, it is
simply mind-boggling. People just
look at the tax bands and draw
quick conclusions that can be
dramatically miscalculating.What about wealth tax?
This is now only applied to
property (i.e buildings) and not
financial assets as it was before,
and only where the taxable value
is above €1.3m. Again, there are
many offsets and allowances,
such as 30% for the principal
residence, so even property
above this level often causes no
tax to be imposed.
For example, this means that
owning a house (maybe a nice
château) valued at €1.8m and
having €10m in the bank, gives
rise to a wealth tax bill of €0!What about local taxes?
We have seen taxe d’habitation
and taxe foncière rise significantly
over the past few years, decreasing
the attractiveness of owning
French property. The good news is
that we are in for a significant cut
in taxe d’habitation, which, for
many people, will be reduced
dramatically to zero.
This means that, even people
with relatively high levels of
income (for example, couples with
tax referenced income up to
€45,000 per year), will not have to
pay this tax by 2020!EXPERT ADVICE
The good news is we are in for a
significant cut in taxe d’habitation,
which, for many, will be reduced
dramatically to zero
Is France’s notorious reputation as
a place of high taxation justified?
Robert Kent investigates
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