The French government have released the proposed French income tax rates and bands that will apply next year on 2021 income.
For those planning still planning to move to France these figures are very useful for your financial planning. Knowledge and preparation will be the key to a happy and successful life in France.
Income bands have increased
Although income tax rates remain unchanged next year, the income bands on which the rates apply have been increased by 1.4% from those of the current year, in line with the retail price index. Last year the increase was only 0.2%.
The proposed bands and rates are as follows:
As income is taxed on a fractional, progressive basis, it means, for instance, that a someone with a net taxable income of €35,000 would pay no tax on the first €10,055, then at 11% for the income between €10,225 to €26,070 and at a rate of 30% on income between €26,070 and €35,000.
For a couple, their total income is divided by two. Thus, using the above example, if the income of a couple were €35,000, they would each be taxed on €17,500, when the first €10,225 of each spouse would be tax free and the sum between €10,225 and €17,500 would be taxed at the rate of 11%. The resulting figure is then multiplied by 2 to give the total tax payable by the household.
The same principle is applied to a family with children, although a child is only a half ‘part’, meaning that the total income would be divided by 2.5. In a family of four the income would be divided by 3, although the tax benefit from dependants cannot exceed €1,592 (2021 income) per child, but higher for widows and divorcees.
Range of tax deductions and tax credits
There are also a range of other tax deductions and tax credits that apply to create a net taxable figure, which in practice means that a single person with a net income of circa €15,000 would pay no income tax, whilst for a married couple it would be circa €30,000.
You can read more in our Guide to French Income Tax.
These rates apply to those who are resident in France. Non-residents with French taxable income are taxed at a flat rate of 20% for income up to €27,519 (2021 for 2020 income). Rental and related investment income beyond this level is taxed at 30%.
Social charges i.e. national insurance
In addition, of course, there are the social charges, akin to national insurance contributions, which you can read about in our Guide to French Social Charges.
Géraud Nayral, of French tax partners Cabinet Budiz, comments that:
“If you are resident in France you must declare your worldwide income on your French tax return, but some foreign income might not be taxable in France – tax treaties are in place to avoid any double taxation. You will also need to declare all your foreign banks accounts with your tax declaration, or risk a fine.”