In­come tax re­forms come into force

French Property News - - News -

Tax­pay­ers in France will start hav­ing their in­come tax de­ducted from their monthly pay­checks un­der a new sys­tem that comes into force in the new year.

Un­til now, it has been up to house­hold­ers to file their own an­nual in­come tax re­turns and pay tax on the in­come they have re­ceived in the pre­vi­ous year. But from 1 Jan­uary, France will op­er­ate a pay-as-you-earn (PAYE) sys­tem called le prélève­ment à la source with em­ploy­ers, pen­sion ad­min­is­tra­tors and other agents tak­ing re­spon­si­bil­ity for col­lect­ing taxes at source.

The new sys­tem will ap­ply to any­one liv­ing and/or work­ing in France with French and for­eign source in­come, in­clud­ing tax-res­i­dent Bri­tish na­tion­als with French source in­come.

Self-em­ployed peo­ple will pay a monthly or quar­terly in­stal­ment, cal­cu­lated by the ad­min­is­tra­tion ac­cord­ing to their in­come from pre­vi­ous months, and then ad­justed ac­cord­ing to their ac­tual in­come.

The fol­low­ing types of in­come will be sub­ject to the new PAYE sys­tem: Em­ploy­ment in­come (i.e. salary) Tax­able state ben­e­fits (e.g. sickness, un­em­ploy­ment) Re­tire­ment in­come (pen­sion, life­time an­nu­ities) Main­te­nance pay­ments Non-french in­come tax­able in France (in­clud­ing UK pen­sions paid to UK re­tirees res­i­dent in France) Rental in­come (in­clud­ing French prop­erty rental in­come of UK res­i­dents) Busi­ness prof­its

The fol­low­ing types of in­come/gains will be ex­cluded from the sys­tem: In­vest­ment in­come (i.e. div­i­dends or in­ter­est) Cap­i­tal gains (real es­tate prop­erty and fi­nan­cial in­vest­ments) Non-french in­come which is sub­ject to French tax credit in ac­cor­dance with a dou­ble tax treaty (UK rental in­come of a French res­i­dent falls into this cat­e­gory)

Tax­pay­ers will pay their 2018 taxes on 2017 rev­enues, but 2019 taxes on 2019 in­come. This means that cur­rent rev­enues for 2018 will not be taxed, in what has been dubbed the ‘ an­née blanche’ – lit­er­ally white year.

The new sys­tem does not com­pletely end the pa­per­work bur­den for house­hold­ers. They will still have to re­port their ac­tual rev­enues to the au­thor­i­ties ev­ery year so that any over­pay­ments can be re­funded and any tax due can be set­tled.

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