France Personal Income Tax

Individual income taxation is based on residence. Taxpayers are categorized as residents or nonresidents. Treaty rules on tax residence override domestic rules.

Residents. Persons of French or foreign nationality are considered residents for tax purposes if their home, principal place of abode, professional activity or center of economic interest is located in France. As a resident, an individual is taxed on worldwide income, subject to applicable treaty exemptions.

Nonresidents. Persons not considered resident as defined above are taxed on French-source income only.

Expatriate tax law. A favorable expatriate tax law applies to employees seconded to France after 1 January 2004. This favor­able tax regime (Article 81 B of the French tax code) provides that under certain conditions, expatriates seconded to France

after 1 January 2004 may not be taxed on compensation items relating to the assignment in France, such as a cost-of-living allowance, housing cost reimbursement and tax equalization pay­ments. The main condition is that the taxpayer must not have been considered a tax resident of France in any of the five tax years preceding his or her year of arrival in France. In addition, up to 20% of the remaining taxable compensation can poten­tially be excluded if the expatriate performs services outside of France during his or her assignment (non-French workdays). The exemptions are available until 31 December of the fifth year fol­lowing the year of transfer to France. Admin istrative regulations on the law, which were released in 2005, provide that the exemp­tions in the law may not be combined with the benefits under the French headquarters rules (see Expatriate French headquarters and distribution center employees).

Effective from 1 January 2008, the favorable tax regime described above (now Article 155 B) was extended to local hires (including French nationals) who relocate to France and meet the above residency criteria. Taxpayers who satisfy the Article 155 B condi­tions benefit from a 50% tax exemption with respect to their foreign-source dividends, interest, royalties and capital gains (resulting from sale of securities) for a period of five years (sub­ject to certain conditions concerning the source of such income). Social surtaxes of 15.5% remain payable on the full income.

Expatriate French headquarters and distribution center employees. A foreign expatriate assigned to the French headquarters (HQ) of a multinational company may be eligible under a HQ ruling for tax relief for up to six years from the assignment date. The prin­cipal advantage of a HQ ruling is the elimination of tax-on-tax if the employer reimburses an expatriate for his or her excess for­eign tax liability. This tax reimbursement is taxed only at the cor­porate rates and is not grossed up. With careful planning, exemp­tion from personal income tax on many benefits and allowances may be obtained. The new expatriate tax law is generally more favorable than the HQ rules and an election must be made as to which of the two regimes applies to the expatriates of a HQ.

Taxable income. Taxable income consists of annual disposable income from all sources. Income is identified based on its nature, and then allowances, deductions and treaty provisions are applied in calculating net taxable income subject to progressive tax rates.

The taxation of each category of income may be modified by an applicable treaty provision. For example, US citizens are not taxed on US-source passive income (however, see Effective rate rule).

Taxable salary income. The total of all compensation paid by an employer is considered taxable salary income and includes such items as the private-use element of a company car, employer-paid meals and employer-paid education expenses for employees and their dependent children. Taxable compensation does not include the following items paid by employers: certain pension contribu­tions, certain medical insurance premiums and, for resident for­eigners and nonresidents, home-leave expenses, moving expenses and temporary housing expenses.

Self-employment and business income. Self-employment income is divided into the following three categories, depending on the nature of the activities: commercial (includes trades), profes­sional and agricultural.

Taxable income realized from each category is subject to the progressive tax rates that apply to resident individuals (see Rates). In addition, a self-employed individual is subject to a flat social tax (see CSG/CRDS and social tax).

Self-employed individuals involved in commercial activities are required to use the accrual method of accounting and must in clude in taxable income all receipts, advances, expense reim­bursements and interest directly related to the activities. Long-term capital gains from disposals of a company’s assets benefit from a special measure, which provides for gains to be taxed at a rate of 16%, with an additional 15.5% (8% for contribution sociale généralisée [CSG]/contribution reimboursement de la dette sociale [CRDS] and 7.5% additional social tax) charged on pas­sive income and capital gains (see Rates).

Taxable income for professional activities is equal to the differ­ence between receipts and expenses actually received or paid in the calendar year. This use of the cash-basis method of account­ing (though optional) constitutes the principal difference between the taxation of commercial and professional activities. Detailed daily records must be maintained by self-employed persons. Long-term capital gains from disposals of assets used in profes­sional activities are taxable at a rate of 16%, with an additional 15.5% for CSG/CRDS and additional social tax charged on pas­sive income and capital gains.

Profits derived from agricultural cultivation and breeding consti­tute taxable income, which is determined by using the cash method of accounting. Because of the variability of farm income, special tax rules apply. In general, long-term gains from dispos­als of assets used in agricultural activities are taxable at a rate of 16%, with additional social taxes of 15.5%. However, specific rules apply in certain cases.

Directors’ fees. Under French internal law, directors’ fees are treated as dividend income. Similarly, because directors’ fees are not considered salary, the 10% standard deduction does not apply.

Directors’ fees paid to nonresidents are generally subject to a flat 30% with holding tax, unless a tax treaty provision reduces or eliminates the tax.

Investment income. Interest and dividends are taxed at ordinary income tax rates. Qualifying dividends can benefit from the “demi-base régime” (that is, a 40% deduction for 2015; however, see Exempt income). See Expatriate tax law for information regarding taxpayers qualifying under Article 155 B.

Net income derived from the rental of real estate and from royalty income (other than for industrial property) is taxed as ordinary income. Royalties from industrial property are taxed at a rate of 33.33%, subject to a possible reduced rate provided in a tax treaty. Income from real estate is subject to income tax plus 15.5% CSG/CRDS and social tax.

Exempt income. Exempt income includes the following:

  • Certain profits from the sale of securities
  • Family allowances and health care reimbursements
  • Payments received pursuant to life insurance contracts (under certain conditions)

Employment income earned by a tax resident of France with respect to employment duties performed outside France for an employer established in France, a European Union (EU) member state or a member state of the European Economic Area (EEA) that has concluded with France a tax treaty containing an admin­istrative cooperation clause is exempt if one of the following conditions is satisfied:

  • For more than 120 days during a 12-month period, the employ­ee is engaged outside France in prospecting for new clients for his or her employer.
  • The employee establishes that his or her salary is subject to a foreign income tax equal to at least two-thirds of the equivalent French tax.
  • For more than 183 days in a 12-month period, the employee performs employment duties overseas in connection with construc tion, engineering, or exploration or extraction of a natural resource.

Supplemental amounts, contractual bonuses or per diems earned for foreign duty by such residents may be exempt from tax under certain conditions, depending on the number of foreign work­days. This exemption is limited to a maximum of 40% of the annual remuneration. Special exemptions and rules apply for small businesses engaged in commercial, professional and agri­cultural activities and in certain other circumstances.

Taxation of employer-provided stock options. Exercise gains real­ized on stock options are subject to full ordinary income tax and employee and employer social security contributions as employ­ment income if either the following circumstances exists:

  • The stock options are from non-qualified plans.
  • The stock options are from qualified plans, and the holding period requirement (for options granted before 28 September 2012) is not met or the reporting requirements (for options granted since 28 September 2012) are not satisfied.

Stock option plans that qualify under French corporate law ben­efit from a favorable tax regime. Foreign plans may be amended to qualify under the French rules.

No taxes or social security contributions are levied when the option is granted. At the time of exercise, taxes and social secu­rity contributions are not levied unless the option exercise price is less than 95% of the average stock price over the 20 trading days preceding the grant date.

An employer contribution is due on the grant of options awarded under a French qualified plan. This contribution equals 30% (rate applicable for options granted on or after 11 July 2012) of the fair market value (FMV) of the option as determined for accounting purposes (International Financial Reporting Standard [IFRS] 2) or 30% of 25% of the value of the shares underlying the options. Employees are also subject to an additional contribution at the date of sale of the shares acquired through the exercise of an option granted under a French qualified plan. This contribution applies to options granted on or after 16 October 2007 and equals 10% (rate applicable for shares sold since 18 August 2012) of the exercise gain (difference between the FMV of the shares on exer­cise and the amount paid to exercise the options).

When stock acquired under a qualified plan is sold, the gains benefit from favorable tax treatment if all of the following requirements are met:

  • The shares are kept in nominative form.
  • For options granted before 28 September 2012, the employee observes a holding period of at least four years running from the date of grant to the date of sale of the shares acquired through the exercise of the option (five years for options granted before 27 April 2000).
  • The employer and the employee satisfy specific reporting requirements at the time of exercise of the option.

Gains derived from the sale of stock acquired under French qualified options granted on or after 27 April 2000 and before 28 September 2012 are taxed in accordance with the following rules:

  • If the four-year holding period is met but the stock has not been held for at least two additional years, the spread (the difference between the FMV of the stock at exercise and the strike price) is subject to tax at a 45.5% flat rate (including 15.5% of social taxes) on the amount of the spread up to EUR152,500, and at a 56.5% flat rate (including 15.5% of social taxes) on the excess.
  • If the four-year holding period and the additional two-year holding period are met (that is, at least six years have passed between the grant date of the option and date of sale of the stock acquired through the exercise of the option, including a stock holding period of at least two years), the spread is subject to tax at a 33.5% flat rate (including 15.5% of social taxes) on the amount of the spread up to EUR152,500, and at a 45.5% flat rate (including 15.5% of social taxes) on the excess.

Alternatively, the employee may elect to have the exercise gain taxed at the regular progressive tax rates (plus 15.5% of social taxes) if this is more advantageous.

As discussed above, for options granted on or after 16 October 2007, an additional employee social contribution of 10% must be paid.

If the stock is sold before the end of the applicable holding period, the spread is taxable as regular employment income at progressive rates. In addition, employer and employee social security contributions are due with respect to the exercise gain (except in certain very specific situations).

For gains derived from the sale of stock acquired under French qualified options granted on or after 28 September 2012, the spread is subject to the following:

  • Income tax at the regular progressive rates
  • 8% CSG/CRDS and the 10% employee social contribution described above

Gains derived from French qualified options granted before 27 April 2000 are subject to specific tax rates.

Any additional capital gain resulting from the difference between the sale price and the FMV of the shares on the date of exercise is taxed as described below in Capital gains.

Taxation of restricted stock awards. Vesting gains realized on restricted stock awards from non-qualified plans are considered employment income and are subject to full ordinary income tax and employee and employer social security contributions at the time of vesting.

Restricted stock awards may be subject to favorable tax and social security treatment. To qualify, the company’s plan must meet specific rules.

In addition, the tax law requires a minimum period of two years from the date of grant to the date of delivery of the shares, plus an additional minimum holding period of two years for the shares received (for restricted stocks granted since 28 September 2012 and authorized by a shareholder meeting that occurred before 8 August 2015, if the vesting period is four years or more, the two-year holding period is no longer a tax requirement). If the vesting and holding period conditions are satisfied, the income tax charge is deferred until the date of the sale of the shares, and no social security tax is due with respect to the value of the stock award.

For restricted stocks granted under an authorization given by the shareholders after 8 August 2015, the tax law reduces the dura­tion of the minimum vesting and holding periods. Under the new law, the acquisition period cannot be lower than one year and the aggregated period of the vesting and holding periods cannot be lower than two years. If a vesting period of at least two years is implemented, no legal or tax obligation to impose a holding period applies.

An employer contribution is due at the date of the award of restricted stocks under a French qualified plan if the implementa­tion was authorized by the shareholders before 8 August 2015. This contribution equals 30% (rate applicable to restricted stock awards granted on or after 11 July 2012) of the FMV of the shares awarded as determined for accounting purposes (IFRS 2) or 30% of the value of the shares on the date of the award. The employer freely determines the method and can choose the method that results in the lowest valuation.

For restricted stocks granted under an authorization given by the shareholders after 8 August 2015, the employer contribution is due at the date the shares are delivered to the employee. This contribution is due at a rate of 20% and is assessed on the FMV of the shares on the vesting date.

Employees are subject to an additional contribution at the date of sale of the shares acquired under a French qualified plan. This contribution applies to shares granted on or after 16 October 2007 and equals 10% (rate applicable for shares sold since 18 August 2012) of the FMV of the shares on the date of delivery. This 10% employee contribution has been removed for restricted stocks granted under an authorization given by the shareholders after 8 August 2015.

Gains derived from the sale of shares awarded under French qualified restricted stock plans that were granted before 28 September 2012 are taxed in accordance with the following rules:

  • Taxable income equals the FMV of the shares at the date of vesting and is subject to tax only at the date of sale. It is subject to income tax at a flat 30% rate, plus 15.5% of social taxes and the 10% employee social contribution described above.
  • If more favorable, the taxpayer can elect to have the stock award taxed at the regular progressive rates of income tax, plus the 15.5% of social taxes and 10% employee social contribution described above.

For gains derived from the sale of shares awarded under French qualified restricted stock plans that are granted on or after 28 September 2012 (under an authorization given by the share­holders before 8 August 2015), the acquisition gain (FMV of the shares on the date of delivery) is subject to the following:

  • Income tax at the regular progressive rates
  • 8% CSG/CRDS and the 10% employee social contribution described above

For gains realized under French qualified restricted stock plans for which implementation was authorized by the shareholders after 8 August 2015, the vesting gain (FMV of the shares on the date of delivery) is taxed at the date of sale of the shares in accor­dance with the following rules:

  • Income tax is imposed at the regular progressive rates with application of a reduction of the tax base of 50% if the shares are held for more than two years after the vesting date. The reduction of the tax base is increased to 65% if the shares are held for more than eight years after the vesting date.
  • 5% social taxes are imposed on investment income (calcu­lated on the amount before any reduction of the tax base).

Any additional capital gain resulting from the difference between the sale price and the FMV at vesting is taxed as described below in Capital gains.

Withholding obligation on French-source portion of French qualified gains realized by nonresident taxpayers. Under Article 182 A of the French Tax Code, the French income tax due on the French-source portion of qualified stock options or qualified restricted stock award gains realized by individuals who are not tax resi­dents in France at the time of the taxable event (that is, the sale of the underlying shares) must be withheld by the entity that pays the cash proceeds from the sale of the shares. The income tax must be withheld at the flat rate applicable to the qualified stock options or qualified restricted stock award gains (18%, 30% or 41% for gains realized in 2016), or at the specific progressive withholding tax rates applicable to compensation income if the beneficiary has elected to have the gain taxed at the progressive rates of income tax. This obligation applies at the date of sale of the underlying shares and concerns restricted stock vested and options exercised since 1 April 2011.

Capital gains. Capital gains derived from the disposal of share­holdings and real estate are subject to tax in France.

Investments. Capital gains realized by a taxable household on the sale of listed or unlisted shares, bonds or related funds are taxed at the taxpayer’s marginal rate of taxation (top marginal rate of 45% for 2015), and are subject to CSG/CRDS and social tax at a combined rate of 15.5%. See Expatriate tax law for information regarding taxpayers qualifying under Article 155 B. The taxable capital gain can be reduced based on holding period.

Real property and shares in real estate companies. Gains derived from the sale of real property are taxable at a rate of 19%, and are subject to CSG/CRDS and social tax (15.5%), resulting in a combined total tax rate of 34.5%. Gains are reduced for each year that the property is held, effective from the fifth year of owner­ship (no chargeable gain arises with respect to property owned for 22 years or more for income tax and no charge for CSG/CRDS and social taxes applies after 30 years of ownership). The pur­chase price is increased to take into account purchase expenses and capital improvements. Effective from 1 January 2013, sup­plementary tax rates apply to capital gains in excess of EUR50,000. These supplementary tax rates range from 2% to 6%.

Exemptions. Individuals may benefit from a total exemption for gains derived from the sale of a principal private residence.

Deductions and credits

Deductible expenses. Expenses incurred in earning or realizing income are generally deductible from such income, and credits may also be available. The following deductions and credits are specifically allowed:

  • Taxpayers may either deduct 10% of net taxable employment income, limited to EUR12,170 (for 2015 employment income), as an allowance for unreimbursed business expenses, without providing proof of expenditure, or they may elect to deduct actual expenses and provide a detailed listing.
  • Tax credits are granted for investment in specified historical or classified real estate, for investment incurred for rental pur­poses and for domestic employee expenses up to a maximum of EUR12,000 (2015 ceiling).
  • A credit is available for qualifying child care expenses (outside the home) equal to 50% of the amount paid, limited to EUR2,300 per child under the age of seven.
  • Tax credits are granted, within certain limits, for charitable donations to recognized charitable institutions.
  • School credits are available in the amount of EUR61 for a child in a college, EUR153 for a child in a lycée and EUR183 for a child in higher education.
  • Amounts paid for alimony and child support (limited for chil­dren over 18 years of age) and for limited dependent parent sup­port are deductible.
  • A tax credit is available for investments in the motion picture and fishing industries and for certain other investments.

Numerous other allowances and deductions may also be available.

Personal deductions and allowances. The family coefficient rules discussed in Rates are used in calculating tax at progressive rates and take into account the size and taxpaying capacity of the household.

Business deductions. In general, deductible expenses for com­mercial, professional and agricultural activities are similar. They include the following items:

  • The cost of materials and stock
  • General expenses of a business nature, including personnel expenses, certain taxes, rental and leasing expenses, finance charges and self-employed persons’ social security taxes
  • Depreciation expenses (two methods are applicable, straight-line and declining-balance, over the normal life of the asset)
  • Provisions for losses and expenses if the accrual method of accounting is used

Rates. French individual income tax is levied at progressive rates, with a maximum rate of 45% for the 2015 tax year (these are the most recent rates available). Family coefficient rules are used to combine the progressive tax rate with the taxpaying capacity of the household. France has a regime of joint taxation for married couples and individuals who have contracted a civil union (Pacte Civil de Solidarité, or PACs). Income tax is assessed on the com­bined income of the members of the household including depen­dents. No option to file separately is available.

Family coefficient system. Under the family coefficient system, the income brackets to which the tax rates apply are deter­mined by dividing taxable income by the number of allowances available to an individual. The final tax liability is then calculated by multiplying the tax computed for one allowance by the num­ber of allowances claimed. Available allowances are shown in the following table.

Family composition                                                  Allowances

Single individual                                                                   1

Married couple:

No children                                                                            2

1 child                                                                                   2.5

2 children                                                                               3

Each additional dependent child                                            1

Limits are imposed on the tax savings resulting from the applica­tion of the family coefficient system. For example, for a married couple, for the 2015 tax year, the tax savings may not exceed EUR1,510 for each additional half allowance claimed.

The progressive tax rates take into account the family coefficient.

The table below reflects the 2015 income tax brackets and rates for individuals.

The following are the 2015 income tax rates.

Annual taxable income (EUR)

Exceeding                 Not exceeding


Tax rate


0 9,700 0
9,700 26,791 14
26,791 71,826 30
71,826 152,108 41
152,108 45

Exceptional 3% and 4% tax on high income taxpayers. High income taxpayers are liable for an exceptional tax calculated on their gross reference taxable income. For single taxpayers, the rate is 3% for the portion of the gross reference taxable income between EUR250,000 and EUR500,000 and 4% for the portion exceeding EUR500,000. For married taxpayers, the rate is 3% for the portion of the gross reference taxable income between EUR500,000 and EUR1 million and 4% for the portion exceed­ing EUR1 million. Gross reference taxable income equals taxable income plus exempt income, less limited items that are tax deductible.

CSG/CRDS and social tax. CSG/CRDS applies to all resident taxpayers. It is charged at a rate of 8% on 98.25% of gross salary if it does not exceed EUR154,464 per year and on 100% of the portion of the gross salary that exceeds EUR154,464, including benefits in kind and bonuses. CSG/CRDS on passive income and capital gains is increased by a social tax surcharge, resulting in a total rate of 15.5%.

The tax administration characterizes CSG/CRDS as an income tax for domestic purposes. However, for social security bilateral agreements and EU social security regulation purposes, it is characterized as a social security charge. Consequently CSG/CRDS is not payable on employment income for expatriates covered under a social security certificate of continued coverage. This exemption for employment income does not apply to taxable passive income, including taxable capital gains.

CSG is charged at a rate of 7.5%, of which 5.1% is deductible for French income tax purposes.

Nonresidents. Nonresidents are subject to a withholding tax on French-source remuneration, after the deduction of statutory employee social security contributions and the 10% standard deduction.

Withholding rates applicable to net French-source compensation received by nonresidents in 2016 are set forth in the following table.

Annual taxable income                                                 Tax rate

Exceeding       Not exceeding                                             

EUR                        EUR                                                             %

0                             14,446*                                                              0

14,446                   41,909*                                                             12

41,909                     —                                                                     20

* Tax brackets are prorated according to the time actually worked in France.

The withholding tax discharges the individual’s tax liability to the extent that the taxable amount does not exceed the 12% income bracket. Excess taxable income subject to the 20% bracket must be reported on an annual nonresident income tax return and is subject to the regular progressive tax rates. The 20% withholding then constitutes a tax credit against the tax liability. Any excess tax credit is not refundable.

A nonresident’s tax liability may not be less than 20% of net taxable income. However, if a nonresident can prove that the effective rate of tax computed on their worldwide income, according to French tax rules, is less than 20%, the progressive income tax rates apply without limitation.

Effective rate rule (exemption with progression). If an individual has income exempt from tax under treaty provisions, the effective rate rule generally applies. Under this rule the taxpayer’s income tax liability is calculated based on worldwide income using the progressive rates and other French tax rules. Total income tax is then divided by worldwide income to yield the effective percent­age rate, which is then applied to income taxable in France to determine total tax payable in France.

Relief for losses. French taxable income is determined for each category of revenue. Expenses incurred in creating income are de ductible from the income produced. The following are deduct­ible losses:

  • Certain rental losses not due to interest payments, up to EUR10,700 per tax household
  • Certain professional losses

The general principle is that losses from one category of income may offset profit from other categories and may be carried forward for six years. However, this principle is subject to limitations. Certain losses may be offset only against income from the same category of income. These include capital losses on quoted stocks and bonds.

Capital losses from the disposal of real estate are final losses and may not be carried forward to offset future capital gains from real estate.

Other taxes

Wealth tax. A wealth tax is levied on individuals with total net wealth exceeding EUR1,300,000.

Effective from 2013, a progressive scale for wealth tax was restored. It replaced the unique rate of taxation established in 2013. In addition, the exceptional wealth tax contribution for 2012 was removed.

The following are the progressive rates of wealth tax.

Taxable wealth (EUR)

Exceeding                        Not exceeding




0 800,000 0
800,000 1,300,000 0.5
1,300,000 2,570,000 0.7
2,570,000 5,000,000 1
5,000,000 10,000,000 1.25
10,000,000 1.5


A discount is planned for the taxable wealth included between EUR1,300,000 and EUR1,400,000.

Under certain conditions, the wealth tax base does not include business assets and works of art. Certain tax treaties, including the treaties with Canada and the United States, may exempt expa­triates from the wealth tax for a limited number of years.

Under French domestic law, a specific exemption exists for indi­viduals who move their residence to France and who have not been French tax residents during the preceding five civil years. These individuals benefit from a wealth tax exemption on their foreign assets for five years.

Wealth tax due from a French tax resident can be capped if the total taxes due from the individual exceed 75% of his or her an­nual income of the preceding year.

French taxpayers liable for wealth tax with a value of net assets between EUR1,300,000 and EUR2,570,000 on 1 January must indicate their net asset value on the 2042 C tax form filed with the annual income tax return. The French tax administration cal­culates the wealth tax and the amount due must be paid after re­ceipt of the wealth tax assessment.

Taxpayers who are liable for the wealth tax and who have net as­sets exceeding EUR2,570,000 must file a separate wealth tax return to be sent in June for French tax residents, together with a check in the amount of the calculated wealth tax.

Debts relating to assets exempt from wealth tax or not included in the wealth tax base may no longer be deducted in the calcula­tion of the wealth tax.

Exit tax. An exit tax on restricted categories of income (mainly capital gains) may apply to taxpayers who departed France on or after 3 March 2011 if they own more than 50% of the stocks of a company or have more than EUR800,000 in shares the day before breaking their French tax residency (these thresholds are in force for departures on or after 1 January 2015) and if the taxpayer was a French resident for at least 6 years during the last 10 years. The exit tax on the unrealized capital gain calculated at the date of the tax residency transfer may be due or may be postponed with or without a financial guarantee, depending on the country to which the taxpayer transfers her or his tax residency. Effective from 1 January 2015, after the departure from France, the taxpayer must hold his or her shares for at least 15 years. If the taxpayer decides to sell his or her shares before the end of the 15-year period, the postponement of the taxation ends, and the taxpayer is taxable on the capital gains calculated at the departure. The taxpayer must comply with filing obligations before the depar­ture from France and every year thereafter.

Inheritance and gift taxes. If a decedent or donor was resident in France (or if the heir or beneficiary is French tax resident and was French tax resident during 6 years of the 10 past years), tax is payable on gifts and inheritances of worldwide net assets, unless otherwise provided by an applicable double tax treaty. For nonresident decedents or donors, only gifts and inheritances of French assets are taxable, provided the beneficiary is also a non­resident of France.

Surviving partners (spouses or partners in a Civil Union [Pacte Civil de Solidarité, or PACS]) are exempt from inheritance tax. The allowance for parents and children amounts to EUR100,000. For grandchildren, the allowance is EUR31,865. The excess is taxed at rates ranging from 5% to 45%, depending on the value of the

inheritance. Surviving brothers and sisters may be exempt from inheritance tax if specific conditions are met. In the absence of these conditions, they may each claim a personal allowance of EUR15,932 and are taxed at a rate of 35% on inheritances of up to EUR24,430 and at a rate of 45% on the excess. Other close rela­tives are taxed at a rate of 55% on the excess over EUR1,594, and other persons at a rate of 60% on the excess over EUR1,594.

The gift tax rates are generally the same as those for inheritance tax, but gifts between partners are taxable (spouses or partners in PACS). Partners benefit from a personal allowance of EUR80,724 instead of an exemption, and the excess is taxed at rates ranging from 5% to 45%.

The following items are exempt from inheritance tax:

  • Life insurance contracted by the deceased (subject to certain age conditions). This exemption is limited to EUR152,500 for each designated beneficiary (as an exception, full exemption for surviving partners), and the excess is taxed at rates of 20% and 31.25%.
  • The transfer of companies by death or gift. The transfer is par­tially exempt from inheritance and gift tax (75% rebate) if specific conditions are met (in particular, commitment of the heirs or the donees to retain the shares of the company). A tax reduction of 50% also applies to a gift of the company if the donor is less than 70 years old.
  • Works of art, if offered to the state.

To provide relief from double inheritance taxes, France has entered into estate tax treaties with the following jurisdictions.

Algeria                         Germany                        Qatar

Austria                         Guinea                           St. Pierre and

Bahrain                        Italy                               Miquelon

Belgium                       Kuwait                           Saudi Arabia

Benin                           Lebanon                         Senegal

Burkina Faso               Mali                               Spain

Cameroon                    Mauritania                     Sweden

Canada                         Mayotte                         Togo

Central African            Monaco                         Tunisia

Republic                       Morocco                        United Arab

Congo                          New Caledonia              Emirates

Côte d’Ivoire                Niger                             United Kingdom

Finland                         Oman                             United States

Gabon                          Portugal

Trusts. Assets held indirectly through trusts located abroad may result in wealth tax and inheritance tax. A trust is an unknown concept in French civil law. It was defined by the tax law in 2011 as legal rights created under foreign law by a settlor (constituent), either inter vivos or by death, who transfers assets to a trustee (administrateur) in the interests of beneficiaries. Since 2011, the French law provides specific rules for trusts located outside France.

Wealth tax. Non-French tax residents who are true settlors of a trust (contributors to the trust and not acting for the account of others), or beneficiaries of a trust in the event of the settlor’s death, are liable to wealth tax in France only on the basis of the

assets located in France. With respect to wealth tax, the same tax exemptions apply as those for a non-French tax resident holding directly assets in France (that is, art collections, professional assets, securities and certain other items). Non-French tax resi­dents must complete their wealth tax returns and pay tax by 31 August. If they fail to meet these wealth tax obligations, the trustee must pay a specific contribution, which equals the amount calculated by applying the marginal wealth tax rate (1.5%) to all assets located in France, notably works of art and professional assets but excluding French financial investments (bank accounts, life insurance and company shares under certain conditions).

Reporting obligations. The trustee must disclose to the French tax administration some details about the trust (including but not limited to settlor identity, beneficiary identity, and nature and value of the asset) if the settlor or at least one of the beneficiaries is a French tax resident, if any asset held in the trust is located in France or if the trustee is a French tax resident. The trustee must file the following two kinds of tax returns:

  • A tax return for each event occurring with respect to the trust (creation, modification, termination and distribution) within one month after the event
  • An annual return detailing all the assets held by the trust and providing their FMV at 1 January

If the settlor and the beneficiaries are not French tax resident, the trustee must declare in the return all of the assets located in France, except financial investments. If the settlor or one beneficiary is French tax resident, the trustee must declare all the assets held by the trust in France and abroad. If the reporting obligations are not respected by the trust, a penalty equal to EUR20,000 or 12.5% of the value of the total trust assets is imposed.

Inheritance tax. The new inheritance tax regime applicable to assets held through a trust is not favorable in comparison with the direct holding of the assets. However, if the assets are specially allocated to the beneficiaries before the death of the settlor and if certain other requirements are satisfied, the assets could be sub­ject to progressive inheritance tax rates in France as if they were held directly by the settlor. If these conditions are not satisfied, the assets are subject to a higher flat rate of 45% (60% if the assets are allocated to a third party).

Trust distribution. Distributions from the trust to a beneficiary may be subject to French taxes or treated as investment income (without the 40% rebate granted for dividends).

A decree was published in May 2016 in order to implement a public register of the foreign trusts with French ties, but this register is currently being challenged in the French courts.

Social security

Contributions. An individual’s social security taxes are withheld monthly by the employer. French social security tax contributions are due on compensation, including bonuses and benefits in kind, earned from performing an activity in France even if paid from a foreign country. However, this rule may be modified by a social security totalization agreement. The total charge for 2016 is approximately 15% to 24% (depending on retirement fund con­tributions and level of remuneration) of gross salary for employ­ees, and 35% to 47% for employers.

Some of the contributions are levied on wages, up to ceilings of EUR38,616, EUR154,464 or EUR308,928 per year (2016 amounts). However, the sickness contribution (employee’s share, 0.75%; employer’s share, 12.84%), the basic state pension contri­bution (employee’s share, 0.35%; employer’s share, 1.85%), the family allowance contribution (employer’s share, 5.25%), and the housing aid, old-age, work accident and transportation contribu­tions (employer’s share, approximately 7%) are levied on the employees’ total remuneration.

Social security taxes are independent from CSG and CRDS con­tributions (see Section A).

Benefits. The following benefits are available to an individual subject to the French social security system:

  • Daily compensation in the event of interruption of professional activity
  • Full retirement pension (basic state pension and complementa­ry pension cover)
  • Family allowance (exempt from income tax)
  • Full professional accident coverage
  • Partial or total medical expense reimbursement

Totalization agreements. The provisions of the French social tax code apply if work is performed on a regular basis in France, regardless of an employer’s place of residence or the source of payment. A French citizen or resident on foreign assignment out­side France may continue to contribute to the French social secu­rity system for a limited period under certain conditions.

To provide relief from double social security taxes and to assure benefit coverage, France has entered into totalization agreements with the jurisdictions listed below. The EU social security regula­tion can usually provide for periods of continued coverage under a home country social security regime for up to five years (with the mutual agreement of the competent authorities of both mem­ber states). Agreements with other countries apply for one to five years and periods of continued coverage may be extended with the mutual agreement of both competent authorities.

Algeria                           Guernsey                     Philippines

Andorra                         Iceland                         Poland

Argentina                       India                             Portugal

Austria                           Ireland                          Quebec

Belgium                         Isle of Man                  Romania

Benin                             Israel                            St. Pierre and

Bosnia and                     Italy                              Miquelon

Herzegovina                  Japan                            San Marino

Brazil                             Jersey                           Senegal

Cameroon                      Korea (South)              Serbia

Canada                           Liechtenstein                Slovak Republic

Cape Verde                    Luxembourg                Spain

Chile                              Madagascar                  Sweden

Congo                            Mali                             Switzerland

Cote d’Ivoire                 Mauritania                    Togo

Czech Republic               Monaco                        Tunisia

Denmark                         Montenegro                 Turkey

Finland                            Morocco                      United Kingdom

French Polynesia             Netherlands                  United States

Gabon                             New Caledonia            Uruguay

Germany                         Niger                            Yugoslavia*

Greece                             Norway

* The treaty with the former Yugoslavia applies to Croatia, Kosovo, Macedonia, Serbia and Slovenia.

Negotiations for a treaty with Australia are being completed, and negotiations for a treaty with China are in progress.

Tax filing and payment procedures

Filing. French residents are required to file annual income tax returns (Form 2042), in general, by the middle to end of May following the end of the relevant tax year (tax year is the calendar year), declaring their net income and charges incurred during the preceding calendar year. The official deadline for filing is the end of February following the close of the calendar year, but this deadline is normally extended to different dates each year depending on the circumstances. The actual filing deadline for a particular tax year is determined by the tax administration and is reflected on the tax return forms issued to taxpayers. A married couple must file a joint return for all types of income and report their dependent children’s income, if any.

Details of certain income items, such as capital gains, real estate income and income received abroad that is taxable in France, are reported on separate returns attached to Form 2042.

Payment. French income tax for resident taxpayers is paid one year in arrears (for income earned in year N, income tax is paid in year N+1) and is calculated by the tax administration based on the information shown on the tax return filed in the year follow­ing the year of earning the income. Income tax is generally paid in three installments with two installment payments equal to one-third of the previous year’s tax liability payable on 15 February N+1 and 15 May N+1 and a balancing payment generally payable by 15 September N+1 following receipt of the income tax assess­ment for year N. A taxpayer may elect to make monthly payments equal to one-tenth of the income tax of the preceding year, with the balance payable at the end of the year.

The French government has indicated its intention to introduce income tax payroll withholding, effective from 1 January 2018. Draft legislation is currently before parliament to introduce payroll withholding and determine the relevant transitional measures.

A penalty of 10% of tax due is imposed for either a failure to file or a failure to pay by the due date. Other interest and penalties may also be assessed, generally at an annual rate of 4.8%, or at a monthly rate of 0.4%.

Nonresidents. The filing date for the annual nonresident tax return is generally between the middle to end of May.

A nonresident with income taxable in France is not required to report that portion subject to final withholding tax on a nonresi­dent tax return. This includes salary income taxed at 0% or 12% rates, dividends and interest. Dividends are subject to a 30% withholding tax, and interest is taxed at rates ranging from 0% to 35%. Tax treaties may modify these rates. Rental income and the portion of salary taxed at a 20% rate must be included on a non­resident return. Few deductions are allow ed in calculating a nonresident’s taxable income. The tax liability with respect to the taxable income declared on the tax return is then calculated using the progressive rates and the family coefficient system. The tax payable is reduced by withholding prepayments, including the 20% withholding on salary.

Double tax relief and tax treaties

If a double tax treaty does not apply, residents are generally allowed to deduct foreign taxes paid as an expense.

France has signed numerous double tax treaties. Double taxation is generally eliminated by a tax credit (for employment income, the credit is generally equal to the French income tax on such income) or by exemption with progression (income is exempt from French income tax but is taken into consideration in determining the effective rate of tax applied to the taxpayer’s other French taxable income).

France has entered into double tax treaties with the following jurisdictions.

Albania                          India                             Philippines

Algeria                           Indonesia                     Poland

Argentina                       Iran                              Portugal

Armenia                         Ireland                          Qatar

Australia                        Israel                            Quebec

Austria                           Italy                              Romania

Azerbaijan                     Jamaica                        Russian

Bahrain                          Japan                            Federation

Bangladesh                    Jordan                          St. Martin

Belgium                         Kazakhstan                   St. Pierre and

Benin                             Kenya                           Miquelon

Bolivia                           Korea (South)              Saudi Arabia

Botswana                       Kuwait                         Senegal

Brazil                             Latvia                           Singapore

Bulgaria                         Lebanon                       Slovak Republic

Burkina Faso                 Libya                            Slovenia

Cameroon                      Lithuania                      South Africa

Canada                           Luxembourg                Spain

Central African              Macedonia                   Sri Lanka

Republic                        Madagascar                  Sweden

Chile                              Malawi                         Switzerland

China                             Malaysia                      Syria

Congo                            Mali                             Taiwan

Côte d’Ivoire                 Malta                            Thailand

Croatia                           Mauritania                    Togo

Cyprus                           Mauritius                     Trinidad and

Czech Republic              Mayotte                        Tobago

Ecuador                         Mexico                         Tunisia

Egypt                               Monaco                        Turkey

Estonia                            Mongolia                     Ukraine

Ethiopia                           Morocco                      USSR (a)

Finland                            Namibia                       United Arab

French Polynesia             Netherlands                  Emirates

Gabon                             New Caledonia            United Kingdom

Georgia                           New Zealand                United States

Germany                         Niger                            Uzbekistan

Ghana                              Nigeria                         Venezuela

Greece                             Norway                        Vietnam

Guinea                             Oman                           Yugoslavia (b)

Hong Kong SAR            Pakistan                       Zambia

Hungary                          Panama                        Zimbabwe

Iceland                             Peru

a) France has agreed with Georgia and Turkmenistan to apply the France-USSR treaty. France applies the France-USSR treaty to Belarus, Kyrgyzstan, Moldova and Tajikistan.

b) France is honoring the France-Yugoslavia treaty with respect to Bosnia and Herzegovina, Montenegro and Serbia.

Work and residence permits

EU nationals. Nationals of the EU, EEA and Switzerland are not required to hold work or residence permits. However, if needed for personal or professional reasons, a residence permit is issued on written request to the relevant police authorities (préfecture) within three months after entering the country.

Since 1 July 2015, Croatian nationals have full access to the French labor market in the same manner as other EU nationals and are not required to hold work or residence permits.

Temporary status. All EU nationals working in France while remaining on the payroll of the company in their home country have temporary détaché status. The employee may enter France without a visa by showing a valid passport or national identity card. The home company must comply with secondment obliga­tions in France and complete a prior registration online form (in French), which outlines the nature, place, duration, and terms and conditions of the assignment. This document is automatically sent to the local Labor Inspection Officer in France before the arrival of the assignee.

The secondment obligations include the following:

  • The home company must appoint a representative in France to fulfill all the requirements on the employer’s behalf.
  • The home company must provide any additional documents requested by the French Labor Inspection Officer that relate to the company and the employee.

Long-term status. EU nationals who are hired by a French com­pany on long-term expatriate status do not need a visa to enter France. However, the French employer is required to issue a state­ment of appointment (declaration d’engagement) to the authorities.

For both temporary and long-term status, on arrival in France, the employee must be in possession of a valid social security certificate of continued coverage or must otherwise be affiliated with the French statutory social security regime.

Non-EU nationals. Non-EU nationals transferred or seconded to France on an intracompany transfer by a company located outside the EEA may be granted work authorization for a period of three years if they meet the following conditions:

  • Their length of service with the foreign employer is at least three months.
  • They earn a minimum gross monthly salary of approximately EUR2,200. However, the salary must be commensurate with the position held and with French salary scales.

Individuals meeting the above conditions may have either déta­ché or salarié permanent status (under a local contract).

The temporary residence permit issued to these individuals is marked “salarié en mission” and is valid for three years. The permit is not renewable for individuals with détaché status (see Détaché status). For salarié permanent status only, the permit is renewable.

Détaché status. Détaché status is available to individuals assigned to France for a limited time period by their non-French employer to perform an activity under its reporting line, such as providing technical assistance or specific expertise or performing reporting functions. They must remain on the payroll of their non-French employer.

The home company must complete a preprinted prior registration form (in French), which outlines the nature, place, duration and terms and conditions of the assignment. This document must be sent to the local Labor Inspection Officer in France before the arrival of the assignee.

Citizens of jurisdictions that have signed totalization agreements with France (see Section C) may continue to be affiliated with the social security scheme of their home jurisdiction for as long as the totalization agreement applies, for example, up to five years under the agreement between France and the United States.

A work authorization is also required for short assignments (less than 90 days). Short assignments cannot be extended beyond 90 days. Business trips cannot be used as an interim arrangement to have an employee work in France before the work authorization is approved by the French labor authorities.

However, as of 1 November 2016, non-EEA nationals transferred or seconded to France on an intracompany transfer by a company located outside of the EEA, including short and long assign­ments, will no longer be required to hold a work authorization. A residence permit will still be compulsory for all assignments longer than 90 days.

Salarié permanent status. Salarié permanent status is available to individuals hired by French companies, who possess special­ized knowledge that justifies the hiring of a non-EEA national for the position. For certain positions, the employer must search the local labor market before applying for a work permit for a foreign employee. These individuals must be shown on the payroll of the French company and receive a French salary with French pay slips. They are subject to French labor law.

All work permit and visa applications must be filed before the arrival of the assignee in France. After the application is approved, the assignee must apply for a visa from the French consulate nearest his or her place of residence abroad. For all assignments over three months, the assignee must apply for a residence permit on arrival in France.

Under the new Immigration Law published in March 2016, the visa for non-EEA nationals who hold this category of permit will be valid for 12 months, and they will benefit from multi-annual residence permits valid up to 4 years, which can be renewed.

The average timeline for processing work permit applications is six to eight weeks from the date when all required documents are completed and filed with the administrative authorities.

European Blue Card. The European Blue Card (Carte bleue euro­péenne) is a category of work and residence permit, which is designed for highly qualified non-EU employees. To qualify for a European Blue Card, the individual must meet the following conditions:

  • He or she must hold a recognized degree of at least bachelor level or proof of five years of professional experience at a com­parable level commensurate with the position to be held.
  • He or she must have a local employment contract for one year or more and affiliation with French social security.
  • He or she must receive a monthly salary amounting to at least 1.5 times the average gross reference salary determined annu­ally by the Ministry of Home Affairs (approximately EUR53,836.50 gross per year as of June 2016).

Under the new Immigration Law published in March 2016, this status will be included in a new favorable category, Passeport Talent, which will be valid for a period of four years. As of 1 November 2016, non-EEA nationals qualifying for this status will be exempt from the requirement of a work authorization. A residence permit will still be a compulsory requirement for this category of highly qualified professionals.

Skills and talents (compétences et talents) status. Skills and tal­ents (compétences et talents) status is available for non-EU nationals who are likely to make a significant and lasting contri­bution to the economic development of France and his or her own country, including chief executive officers and managing direc­tors of companies that are part of the same group of companies globally.

Applications outlining the project must be submitted to the French consulate if the individual lives abroad or to the local Préfecture if the applicant lives in France. The compétences et talents card is valid for three years, and is renewable.

Under the new Immigration Law published in March 2016, this status will be included in a new favorable category, Passeport Talent, which will be valid for a period of four years.

Non-EEA nationals qualifying for this status are exempt from requiring a work authorization. A residence permit is still a compulsory requirement for this category of highly qualified professionals.

Long-stay visas. Long-stay visas (duration of more than three months) equivalent to a residence permit (visa long séjour – valant titre de séjour) are issued to the following categories of persons:

  • Spouses of French nationals
  • Visitors
  • Students
  • Employees (with a work contract of 12 months or more)
  • Temporary workers (assignments more than 3 months but less than 12 months)

Long-stay visas entitle the holders to reside in France for up to 12 months during the validity of their visa, without the need to apply for a separate residence permit.

The above measures do not apply to assignees on an intracom­pany transfer (salarié en mission). The long-stay visa issued to this category of employee remains valid for three months and a separate residence permit must be applied for within two months after arrival in France.

At the time of the visa application, the applicant’s passport must have a validity of more than 6 months beyond the length of the visa requested (for example, with respect to a 12-month assign­ment, the passport must be valid for at least 18 months).

The applicant must undergo a compulsory medical examination on arrival in France. Following such examination, an official sticker is affixed to the applicant’s passport showing the appli­cant’s personal address in France.

If the purpose of stay in France is extended, an application for the renewal of the residence permit must be made with the local Police Authority.

Senior managers of companies. Foreign nationals who want to be appointed chief-executive officers or general managers of French companies or engage in commercial activities must apply for a trader (commerVant) or skills and talents (compétences et talents) visa from the French consulate in their country of residence before arrival in France.

Individuals who wish to reside in France must complete formali­ties to obtain a trader or skills and talents residence permit, which allows them to be registered on the Companies and Business Register.

The following categories of individuals are not required to obtain a trader residence permit:

  • Holders of a 10-year resident card (carte de résident; see Section G)
  • Nationals of the EU, EEA or Switzerland

Permanent residence permits

After five consecutive years of residence in France and payment of French income tax, the holder of a residence permit may apply for a resident card (carte de résident), which is valid for 10 years and is renewable. The relevant police authorities have substantial discretion with respect to the approval of a permanent resident card, which allows individuals to work for any employer in France.

Family and personal considerations

Family members. Non-EU nationals who accompany their EU national spouse to France may obtain a residence permit with the endorsement “EU National or Family Member” (carte de séjour “Ressortissant UE Membre de famille”) if the EU national lives and works in France. They are granted the same right to work as their spouses.

Non-EU nationals who accompany their non-EU national spouse to France can obtain a residence permit.

Spouses of non-EU nationals in the following categories receive a residence permit marked “Private and Family Life,” which entitles them to work in France:

  • Intracompany transfers (salarié en mission)
  • Skills and talents (compétences et talents)
  • European Blue Card (Carte bleue européenne)

Non-EU dependent children under the age of 18 obtain a move­ment document for foreign minors (document de circulation pour étranger mineur) if they accompany non-EU nationals to France. Children of non-EU nationals born in France receive a French Republic identity card (titre d’identité républicain).

Under the new Immigration Law, family members of foreigners in the categories listed above have the same entitlements within their immigration status as the person whom they are accompa­nying, such as the same right to work.

Marital property regime. In the absence of a marriage contract, the default marital property regime in France is community property. For spouses married in France without a specific contract, all property is community property (including income derived from separately acquired property, but excluding gifts and inheritances and assets owned before the marriage). Spouses may elect a different marital regime (for example, separate ownership) by pre­nuptial agree ment or, during the marriage, by a court-approved notarial deed.

Forced heirship. A person may not give away a certain portion (called the réserve) of his or her property by either inter vivos or testamentary transfer. The reserved portion is one-half of the property for a person with one child and a spouse, two-thirds of the property for a person with two children and a spouse, and three-quarters of the property for a person with three or more children and a spouse. This measure may apply to nonresidents who own property located in France.

Driver’s permits. Holders of foreign driver’s licenses must apply to exchange them for French driver’s licenses before the end of the first year of permanent residence in France. An exchange is authorized automatically for licenses issued by certain countries or certain states in a country. For example, with respect to the United States, automatic exchange is authorized for the following states.

Connecticut               Kansas                            Pennsylvania

Colorado                    Kentucky                        South Carolina

Delaware                    Michigan                         Texas

Florida                        New Hampshire             Virginia

Illinois                         Ohio

Individuals with driver’s licenses from other states must take the French driver’s license test, which consists of a written examina­tion and a practical driving test.

Holders of valid driver’s licenses from EU member states are not required to exchange them for French licenses. However, licenses from certain EU member states may need to be renewed regularly.