You have your heart set on opening your own business in – or moving your existing company to – France to keep a foothold in the EU ahead of Brexit, but there is one thing that is holding you back: taxes.
Why are French taxes so high?
The French system of taxation is well known for its complexity, high marginal rates, and high administrative costs. It’s one of the most highly taxed countries in the world, with some businesses paying taxes on a third of their income.
But it’s not just business taxes; income taxes are also high and there will be no tax cuts in 2018 for households. According to the National Institute of Statistics and Economic Studies, French residents will pay at least €4.5 billion more this year.
All residents in France are liable to pay taxes on their worldwide income. People are deemed to be tax residents of France if they meet any of the following criteria;
- They spend 183 days or more a year living there
- Their habitual residence is located in the country
- Their principal business activity is solely based in the country
- Their centre of economic interests is based there, i.e. The majority of income is from French sources or their principal investments are located there
What taxes do I have to pay?
There are three main types of personal taxes in France: Income Tax, social security contributions, and VAT on goods and services. The standard rates for these taxes are dependent on your earnings and profits.
Mid to high earners can be expected to pay up to a 45% chunk of their earnings while those at the lower end of the scale only contribute if their earnings are over €10,000. This tax is calculated per ‘fiscal household’ on a yearly basis.
This comes into play for businesses and large companies for which the flat rate of tax is 33.3% on all profits over €75,000 made in France. This rate is set to drop to 28% by 2020 and projected to drop to 25% by 2022.
There is 20% VAT included in the sale price of goods and services, including those purchased for your business, i.e. printers, phone bills, business lunches.
There are reduced rates for certain goods as services ranging from 2.1% on newspapers and 5.5% on food and books to 10% for certain pharmaceuticals, public transport and cultural activities.
In addition to personal taxes, residents of France are also required to pay local property rates on any property they own that are comprised of two different taxes; Residence tax and Ownership tax.
Residence tax is imposed annually on the occupier of a property in which they were a resident in 1st January each year. The rates are determined by the local council and vary across the country. Since January of this year however, the residence tax is set to be abolished on a phased basis for around 80% of households.
Ownership tax is the responsibility of the owner of a property annually. The contributions from this tax go towards the funding of local services by the council of each area.
Where do I begin with these taxes?
The mind boggles at the amount and complexity of taxes that need to be managed and paid for the benefit of having your business in a prime location on the continental mainland.
This is why many expats decide to find an English speaking accountant in France, like French Business Advice to help them manage their affairs. They can help to explain the complex rules and regulations and will guide you through every step of the taxation system and ensure that relevant communication is kept with the authorities.
Are you put off by the high taxes? Would you feel more comfortable with an English-speaking accountant to guide you through the system? Have you set up a business in France and would like to share your thoughts on the tax system? Let us know your thoughts in the comments below.