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TAXES

France has ‘third highest tax burden in EU’

France is synonymous with taxes and a new report released on Monday has revealed that France’s tax burden is now in the top three in Europe when compared to the percentage of its GDP.

France has 'third highest tax burden in EU'
France's tax burden in terms of a percentage of its GDP is on the increase and is one of the highest in Europe. Photo: AFP

New stats revealed that the ratio of France’s tax burden when compared to its GDP continues to grow and is now among the top three in Europe.

The ratio of tax revenues to GDP varies greatly among member states of the EU but in France it stood at 45 percent in 2012, a report from Eurostat, the statistical office of the European Union has revealed.

That ratio put it ahead of Scandinavian countries like Sweden (44.2 percent) and Norway (42.4 percent) both of which are renowned for their high taxes.

Only Denmark (48.1 percent) and Belgium (45.4 percent) have a higher tax-to-GDP ratio than France.

Across the EU, the overall sum of taxes as a percentage of GDP reached 39.4 percent in 2012, although it was 40.4 percent in the 18 countries using the euro currency.

The increase in France's tax-to-GDP ratio (from 43.7 percent to 45. Percent) was in stark contrast to the UK where the ratio fell from 33.2 percent to 32.4 percent.

Those figures may not surprise anyone who has been reading the French news in recent years. When socialist president François Hollande was elected in 2012, he immediately set about raising taxes at the same time the country’s beleaguered economy stuttered in an out of recession.

However, despite the furor over Hollande’s plan to levy a 75 percent tax rate on the rich and France’s long standing reputation for having a hungry taxman, when it comes to levies on labour, Eurostat’s figures may surprise a few.

While France, like most EU countries, raises most of its revenue through labour levies, the percentage it makes up of the total tax revenue is less than in other countries.

For France, 52.3 percent of its the overall tax revenue came from labour taxes – the same as in 2012 – in Sweden the equivalent figure was 58.6 percent, in Germany it was 56.6 percent and in Belgium it was 53.9 percent.

The Netherlands (57.5 percent) and Austria (57.4 percent) also raised more money of their overall revenue through labour taxes than France did.

The French have long accepted the principle of paying high taxes in return for top quality public services but with a recent poll revealing more than seven out of ten French tax payers are of the view they are being hit too hard in the pocket, perhaps the traditional view is changing.

In an analysis article last year titled "Why do the French Tolerate Such high Taxes", The Economist magazine suggested "the social contract", between the French and the state, "could be on the verge of breaking down".

Earlier this year the French government appeared to respond to those fears when PM Manuel Valls announced that taxes would be cut for 1.8million of the country’s poorest households.

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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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