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Rising number of French struggle to pay taxes

Households across France are starting to receive notice of how much they owe in income tax on their earnings but figures released on Tuesday show more people than ever are struggling to pay the tax man.

Rising number of French struggle to pay taxes
More and more French are struggling to pay their taxes. Photo: AFP

France has seen an explosion in the number of households requesting a deferral or cancellation of part or all of their tax bill in recent years.

The country’s public finance body, the DGFiP, says there was a 22% rise in the number of such requests between 2011 and 2013, from around 177,000 to more than 216,000.

Over the same period, the number of reminders for payment sent out by the French government has soared from 4.5 million to nearly 10 million.

According to Anne Guyot-Welke, from Solidaires Finances Publiques, a trade union for public finance workers, the freezing of tax benefits for single parents in 2011 meant that “many vulnerable households became taxable” for the first time.

“Many taxpayers in poverty are having difficulty paying their tax bills,” she told French daily Le Figaro. “This is also because of rising local taxes,” she added.

France has a global reputation for its high taxes. A recent study by liberal minded Brussels-based think tank the Molinari Economic Institute study found that the real tax rate for an average worker in France in 2014 stands at 57.17%, well above the EU average of 45.27%.

The French are also having to dedicate a larger portion of their earnings to paying off the taxes. The Molinari study found that the “day of fiscal liberation” for French workers – the day when they have earned enough to pay their tax bill for the year – fell on July 28th, two days later than the year before.

However some doubted the veracity of that study by an organisation that has been highly critical of France’s taxation policies. 

A separate study by Eurostat in June revealed that France had the third highest tax burden in Europe behind Denmark and Belgium.

The stagnating French economy is also taking its toll on earnings and on the poorest section of French society in particular.

As of 2011, the most recent year for which figures are available, about 14.3 % of the French population lived below the poverty line, 0.3% up on 2010 and a number that has been steadily going up since 2008.

And it could be about to get worse for many when this year’s tax bill lands through their letterbox. Despite a €350 tax rebate for low earners announced by the government in the spring, millions could see the amount they owe rise on last year, France’s BFMTV reported Tuesday.

It quoted Gilles Carrez, head of the French Parliament’s Finance Commission and member of the main opposition UMP party, as saying that between 12 and 15.5 million taxpayers can expect a bigger bill this year than last, thanks to a combination of various tax reforms.

by Sam Ball

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TAXES

Explained: France’s exit tax

Planning on leaving France? You may, depending on your circumstances, be charged the 'exit tax'.

Explained: France's exit tax

Like some other European countries, France does have an exit tax for those (French or foreign) who are leaving the country. It’s known by the English name l’Exit tax.

However, it won’t affect most people.

Only those who have been tax resident for a minimum six years of the 10 years immediately before they permanently move out of the country are liable to pay an exit tax – if, that is, they own property, titles or rights worth a minimum of €800,000, or that represent 50 percent of a company’s social profits.

If that affects you, the best advice is to seek expert individual financial advice before moving out of France for good. The relevant page on the French government’s impot.gouv.fr website says it is possible to defer payments, and some relief is available.

Because of the relatively high figures involved, this tax is irrelevant for most people. That said, however, you will still have to inform tax authorities that you are moving out of the country because you may still have income, property and capital gains taxes to pay.

Income tax

You must inform the tax office that you are moving and give them your new address so that your tax declarations can be transferred to your new address.

You are liable for tax on everything you earned in France prior to your departure as well as on any French earnings that are taxable in France under international tax treaties that you earned after your departure.

The year of your departure, you declare your previous year’s earnings as normal – declarations in spring 2024 are for earnings in 2023.

A year later, you will have to declare any earnings taxable in France from January 1st up to the date of your departure, and any French-sourced income taxable source until December 31st of the year of your departure.

If you continue to have any French-sourced income – such as from renting out a French property – you will have to declare that income annually, using the non-residents declaration form.

Property taxes

You will have property taxes to pay if you own a French property on January 1st of any given year – whether it is occupied or not. 

Property tax bills come out in the autumn, but they refer to the situation on January 1st of that year, so even if you sell your property you will usually have the pay a final property tax bill the following year.

Moreover, if you receive income from property in France or have rights related to that property (such as shared ownership or stock in property companies), as well as any additional revenue connected to the property, during the year you leave France, you will be required to pay taxes on these earnings.

If any property assets in France exceed €1.3 million on January 1st of a given year, you may also have to pay the wealth tax (IFI).

READ ALSO What is France’s wealth tax and who pays it?

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Capital gains tax 

If you sell your French property or share of a French property, you may be liable for capital gains tax at a rate of 19 percent. It will also be subject to social security contributions at the overall rate of 17.2 percent.

Capital gains tax varies depending on how long you have owned the property and whether it was a second home or your main residence.

READ ALSO How much capital gains tax will I have to pay if I sell my French property?

The good news is, if you move to another EU country, or any country that has a specific tax agreement with France, you may be exempt from capital gains tax for non-resident sellers on the sale of a property that was your principal residence in France.

If you move elsewhere, you may be able to claim exemption on capital gains tax up to €150,000. As always, you should seek expert financial advice.

Tell Social Security

Inform social security that you are leaving France permanently – and return your carte vitale if you have one. If you do not, you may be liable for any benefits you receive to which you are no longer entitled.

More mundane tasks involve informing utility and water companies, your internet provider, if you have one, the phone company, your insurance companies, banks – and La Poste, who will be able to forward your mail for up to 12 months, for a fee…

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