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INCOME TAX

Here’s how the new French income tax cuts will affect YOU

When French Prime Minister Edouard Philippe laid out the government's agenda for 'Act II' of the current presidential term, he made it clear tax cuts were a priority. Here's a look at what the reform to income tax means for you.

Here's how the new French income tax cuts will affect YOU
Here's how the French tax cuts will affect you. File photo: AFP
Philippe said that the government had received the message that the French are suffering from tax fatigue – one of the messages of the anti-government Gilets Jaunes movement – “loud and clear”. 
 
In practice this means that income tax will drop by €5 billion as part of a reform specifically aimed at improving the financial situation of “the working middle class”.
 
The tax cuts are set to come into effect on January 1st 2020 after being voted through as part of the 2020 finance bill.
 
That means that in January 2020, 12 million households in France will be affected by a decrease in income tax from 14 percent to 11 percent that will see an average annual gain of €350 euros. Meanwhile the five million households included in the second drop – who already pay less tax – will benefit from an average annual gain of €180.
 
Here's a look at who will be included in the reforms – and by how much their bills will be cut.
 
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From tax cuts to plastics ban: French PM reveals list of reforms for 'Act II' of Macron's presidencyFrench Prime Minister Edouard Philippe laid out the plans on Wednesday. Photo: AFP

The good news is that eventually virtually everyone will benefit from the cuts. 
 
Once the reform is complete, of the 17 million households that pay income tax in France, 16.8 million will see their bills slashed by an average of €304. 
 
Taxpayers will naturally see their bills drop by varying amounts depending on the income tax bracket they fall into, as well as their personal circumstances, such as whether they are single or married, and whether or not they have children.
 
The Ministry of the Economy and Finance has created a list of examples, exclusively revealed by Le Parisien, to show the kind of cuts people can expect. 
 
Couples without children
 
Couples without dependent children are among the big winners of the reform.
 
For couples who have a joint monthly income of €4,600, the drop in their annual tax bill will be €892, representing a drop of 21.4 percent. So, instead of handing over €4,165 to the French taxman at the end of the year, they will pay €3,273. 
 
For couples with a monthly income of €3,000, the drop will be €151 euros (-17.4 percent).
 
Individuals without children and single parents
 
The annual gain for single people earning €2,000 per month with no dependent children will be €541, which represents a decrease of 33.2 percent in their tax bill. 
 
Those with a monthly income of €3,000 will see their income tax drop by €125.
 
Meanwhile a single parent raising a child and earning €2,600 per month will benefit from a drop of 29.7 percent.
 
Their income tax will drop from €758 to €533, a total of €225.
 
Those with a net income of €3,600 per month, will see their income tax bill drop by 21.4 percent, or €568 euros less over the year. For those who earn €4,600 euros per month, the drop will be €125.
 
Why Macron is fretting over the big change to how the French pay income taxPhoto: AFP
 
In his speech on Wednesday, the prime minister highlighted that the government would look to improve the lives of single parent families after the issue was frequently raised during the course of the “Grand Debat” – Macron's answer to the 'yellow vest' protests. 
 
In addition to the tax cuts, Philippe announced the creation of a “single family information service” in 2020, which will enable parents to “know in real time the availability of crèches and childminders available”.
 
He also said that from June 2020, there would be a “new system to protect single people against the risk of unpaid child support payments.” 
 
Couples with two children
 
A couple earning a joint salary of €4,600 per month with two children will see their income tax decrease from €2,770 to €1,885 euros, representing a decrease of 31.9 percent (€885).
 
Meanwhile couples with an income of €4,000 per month, will gain €181 euros after the reforms.
 
Retired couples
 
For retired couples with a monthly income of €4,600 will drop by 21.4 percent, making an annual gain of €892, while couples with an income of €3,000 will see their tax bill cut by 17.4 percent, meaning an annual saving of €151. 

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INCOME TAX

French income tax declaration: Here’s what you need to remember

It's time to make that annual declaration of earnings to the French taxman so, with that in mind, we asked a tax expert in France to let us know the most important things to remember when it comes to filing your tax returns.

French income tax declaration: Here's what you need to remember
Photo: AFP
The deadline for the tax declaration (La Déclaration des Revenus) is upon us, with Thursday May 17th marking the day when all paper applications must be submitted, although those who file them online have an extension depending on where they live.
 
While some of you will already have filed your tax return, others will no doubt be procrastinating in order to put off yet another French bureaucratic challenge.
 
And that's understandable — tax season can be particularly daunting if you're new to France. 
 
When it comes to making the declaration there are certain things you need to remember. Some may seem obvious, but many are forgotten and may lead to problems further down the line.
 
We spoke to Simon Smith, head of tax at French law firm Triplet et Associés to get some tips on how to make French tax season as hassle free as possible.
 
You might not have to declare at all 
 
Firstly, there might be good news for some of you… You might actually not have to declare tax this year at all. 
 
That's because if you arrived after January 2018, you won't be included in the previous tax year in France, where taxes are calculated according to the calendar year. 
 
Photo: stokkete/Depositphotos
 
First timers have to declare on paper
 
For those of you paying taxes in France for the first time, you'll have to declare on paper. 
 
While this might sound like a hassle, you'll only have to do this the first time. Next year, when you're in the system, you'll be able to do it all online.
 
Declaring online 
 
The website allows you to calculate exactly how much you'll have to pay (or how much you'll get back) immediately, rather than having to wait for months to find out. 
 
France's 101 départements have been divided into three groups, to ease congestion and the risk of crashes on the official government website – which tends to happen when deadline day approaches.
 
If you're going to leave it to the last minute, the internet declaration deadlines, which depend on which region of France you are in, are as follows: 
 
Départements 0-19 – May 22nd
Départements 20-49 – May 29th 
Départements 50 plus – June 5th
 
Declare your foreign bank accounts
 
One of the things that expats in France have to do, but often forget, is to own up to any foreign bank accounts. 
 
“This is a way for the tax office to have an idea of what your financial situation is in general, not just in France,” French tax lawyer Simon Smith tells The Local, and it can be done on a separate piece of paper.
 
So, if you have bank accounts and/or ISAs back in the UK, for example, you are expected to include evidence of the interest you earned on these accounts, but thanks to an agreement between France and the UK, you won't have to pay taxes on the interest if you already have in the UK.
 
Photo: AFP
 
Ask for help
 
The thought of visiting a French bureaucrat in person to get help on filling in your tax form might fill many with dread but it's likely to be worthwhile. 
 
For a start if you are filling in your first tax declaration then you'll need to go down to your local tax office anyway to pick up the correct forms and while you are down there it's a good idea to join the queue and get some help from a member of staff if you are unsure.
 
“They are very helpful and will tell you what you need to know,” Smith says, although he added that while they will try to help they might not speak fluent English. 
 
So, if you're worried about understanding them properly, you might want to consider paying an advisor for the first year. 
 
By doing it with someone who hopefully knows what they are doing, the next one will you fill in should be a lot easier. 
 
You could also check with your local Town Hall which sometimes invite French tax lawyers and accountants to give advice to people on their tax returns. 
 
Visit the English page of the tax authority's website
 
If you're starting from scratch, visit the English page of the tax section of the French government's website, Smith advises. 
 
This can be found HERE.  
 
Photo: ginasanders/Depositphotos
 
Forms
 
The 2042 form is the main one but there are others that you might need to fill in depending on your situation. 
 
Whilst the Déclaration des Revenus comprises a variety of forms, according to circumstances, here are some of the main forms that apply to expatriates. You'll also be able to download forms from www.impots.gouv.fr.
 
Others include the 2042C, an additional form which is required if you have received income from furnished letting or chambres d'hôtes, or where you have paid tax in the UK that needs to be offset against French tax, and the 3916, a form which covers details of any bank accounts located outside of France.
 
There's also the 2047, a form for any income received outside of France. Foreign income must be declared on this form, as well as on Form 2042.
 
Tax deductibles
 
There are some professionals, including journalists, who receive tax breaks from the French government. 
 
“There are many professions which have their own place within the French tax system,” Smith said. “When you file your taxes for the first time it's important to check whether yours is one of them.”
 
The French can also claim tax breaks for house improvements, child care and gifting so it's worth asking if you think you might be able to benefit.  
 
Taxed as a household 
 
Whereas in the UK you pay tax as an individual, in France you are taxed by household. So if you are a married couple or if you are “pacsed” (in a civil partnership) then you should make one joint declaration rather than two. If you got married halfway through the year you can now declare one common declaration (instead of three, which was previously the case) for the whole year.
 
And if you have any children living with you that are earning then you'll need to declare their earnings too…and that includes any summer jobs. 
 
Things will change
 
There will be more changes (and hopefully fewer headaches) when it comes to paying taxes in the future, with income taxes to be deducted at source from January 1st 2019.
 
That means workers will see the taxes deducted straight out of their wages at the end of each month in real time, similar to the Pay As You Earn system in the UK.
 
It's probably worth noting, however, that we've been promised this before. 

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