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Is France set to postpone its flagship income tax reform… again?

A major reform is set to come into force from January next year that will see all workers have their income tax automatically deducted each month, but President Emmanuel Macron suggested on Thursday the landmark change could be postponed once again and perhaps even scrapped altogether.

Is France set to postpone its flagship income tax reform... again?
Photo: AFP

The major reform that was announced by the previous government under former President François Hollande was finally set to come into force in January 2019 after years of promises, talks and delays.

The change would see most workers in France have their income tax automatically taken out of their wages each month, as is the case in most other European countries, rather than the current system which sees employees pay income tax the following year.

The reform, which President Emmanuel Macron backed, was due to be implemented in January 2018 but was delayed a year because the new government wanted time to make sure the reform was actually worth it and to smooth out any problems.

But speculation has grown in recent days that the change may be put back once again just as more opposition voices have spoken up urging the president to scrap the plan altogether.

On Thursday Macron announced that he wanted some “precise responses” before deciding once and for all if  the change to income tax payments would be brought in in January.

“I have the intention to push this reform through on time but I have asked the relevant ministers to answer all the questions that still arise before giving a final directive,” said Macron.

“I need a series of very precise answers and to be sure of what our citizens will go through when this reform is introduced,” he added.

“It's normal that we make sure that all the details are clear. I want to see in detail what it means for each citizen.”

According to French newspaper Le Canard Enchainé Macron is ready to postpone a reform that would impact France's 38 million tax paying households.

The paper claimed the president will decide before September 15th whether to push ahead or delay it again.

The reform is obviously complex but the government has grown particularly concerned about technical bugs that may impact the new system as well as the psychology impact on tax payers who will naturally see a drop in their monthly salary on their pay slips.

Macron, already under pressure due to low popularity ratings, will fear the reform will give the French the impression that they are losing their spending power under his leadership.

The introduction of income tax at source has already been delayed until 2020 for certain workers such as privately employed home carers and child minders because the systems tasked with collecting their income tax will not be ready.

READ ALSO: How paying your income tax in France will change dramatically

 

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TAXES

Should I include my grown-up child in my French tax declaration?

Young adult children are often still financially dependent on their parents, and under some situations you can continue to claim them on your French tax declaration.

Should I include my grown-up child in my French tax declaration?

As soon as a child reaches the age of majority – 18 in France – they are, in principle, subject to personal income tax and should file their own tax returns, even if they do not receive any income. 

But at this age many children still live in the family home, or are studying at university and are likely still financially dependent on their parents.

The good news is that, if a child is still dependent on their parents’ financial support, they can be included in the tax household, which leads to a number of tax benefits, depending on your situation.

This includes adult children away at university, who – for tax purposes – may still be considered to be dependent and ‘living at home’, even if they are away studying at the other end of the country.

If you are not sure whether you need to add an adult child to your tax return, officials at your local tax office will be able to help you.

READ ALSO Tax benefits of having children in France

When can you include your adult child on your French tax return?

A child over the 18 may be attached to their parents’ 2023 tax return (declarable in 2024) in the following cases:

  • your child was under 21 on January 1st, 2023;
  • your child was under 25 years of age on January 1st, 2023, and in full-time education either on January 1st, 2023 or December 31st, 2023.
  • Disabled children over the age of majority can be included on their parents’ tax declaration regardless of age.

If your adult child lives with you and is attached to your tax household, you can deduct a lump sum of €3,968 from your income on your declaration for 2023 earnings. According to the tax authorities, this amounts to the cost of board and lodging.

READ ALSO Explained: How to fill out the French tax declaration

“When the child’s accommodation covers only a fraction of the year, this sum must be reduced in proportion to the number of months concerned (…) Even if it is a lump sum, the amount deducted must be declared by the beneficiary”, the tax authorities’ website states.

Be aware, however, in situations where the parents are taxed separately (for example, if they have divorced), an adult child who is still financially dependent can only be attached to one or other tax household, not both.

How do I add an adult child to my tax declaration?

Since the introduction of the prélèvement à la source (withholding tax), you can add your child to your tax household online in your personal space on the impots.gouv.fr website by clicking on Actualiser suite à une hausse ou une baisse de revenus in the Gestion mon prélèvement à la source section.

READ ALSO: How to file your 2023 French income tax declaration

You also need to report it on the annual tax return, in the box provided for this purpose, section D on page 2.

If you prefer, you can also visit your nearest tax office, where officials will help you.

What you need to declare

If your adult child is attached to your tax household, parents must declare on their tax return any income that child received for the entire year (that’s income from 2023 on tax returns filed in Spring 2024).

READ ALSO EXPLAINED: How to get a ‘numéro fiscal’ and create a French tax account

The following incomes are exempt from income tax:

  • internship allowances and apprentices’ salaries, provided they do not exceed the annual minimum wage (€20,815 for income earned in 2023). Any amount earned over this is taxable;
  • Salaries of students aged 25 or under working student jobs, up to an annual limit of three times the monthly SMIC (€5,204 for income earned in 2023). Any amount earned over this is taxable.

What about student grants or scholarships – should we declare those?

That depends on the type of grant or scholarship. 

Specific research scholarships, for example, should be declared, but bourses allowing children from lower-income families to attend further education establishments should not. 

READ ALSO 10 tax breaks you could benefit from in France

If you are unsure whether you should declare a grant or scholarship, you can find out more according to your specific situations here, or visit your local tax office.

Financial aid for children on low income

Even if your child lives on their own and files their own returns, parents who provide monthly financial assistance to adult children up to the age of 25 can declare the sums paid up to a limit of €6,368 per year. This aid is fully deductible, but must be declared on your adult child’s tax return.

“You must keep all receipts for expenses, as they may be requested by tax authorities. If the parents are taxed separately, each parent can deduct expenses up to this limit,” the tax office website says.

Try it out

You can simulate calculations for your 2024 tax return, with and without any adult children added, using the tax office simulator.

READ ALSO How much tax can you expect to pay in France in 2024?

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