French tax system is one of self-assessment.
Tax is assessed at the level of the tax household, i.e. the family entity consisting of a single person, spouses (regardless of the marriage settlement) with their children and other dependants. In other words, the assessment basis is generally the total income of the different members of the tax household.
Barring exceptions, all income, regardless of its origin, is aggregated to determine an overall net income to which a single tax scale applies.
This scale has progressive income brackets:
|Income band||Rate of tax|
|Up to €9,710||0%|
|€9,711 to €26,818||14%|
|€26,819 to €71,898||30%|
|€71,899 to €152,260||41%|
The basis for assessing French income tax is that the combined income for the household is split into units, or “parts”. It is used to take into consideration the dependants and to lessen the impact of tax progressiveness accordingly.
For example, for a married couple this means the combined income is split equally between you. The half share is the applied to each of the tax bands as appropriate and the resulting tax calculation is then multiplied by two.
A married couple with children have the benefit of extra “parts” for their children (i.e. the children are considered to have earned part of the household income), as shown below, which further reduces the tax liability.
|Married couple without children||2 parts|
|The first two children||½ part each|
|Third and subsequent children||1 part each|
For example, a married couple with 4 children would be able to divide their combined household income into 5 “parts” with the various tax bands being applied to only one fifth of the total income. The resulting tax calculation is then multiplied by the number of “parts” (i.e. 5) in the household.
This may sound a very complicated method of calculation, but it has the benefit of keeping your marginal tax rate as low as possible.
In reality therefore, a large “household” will have to earn a very large taxable income before moving into the top tax band and, for the majority of couples, if one spouse earned the majority of the earned income or pension income, French tax is less than its UK counterparts for example.
Finally, there are certain cases where extra “1/2 parts” are allowed, such as if you are a widow, having raised children, who are now adult. It is therefore very important to complete the section on your personal situation as fully as possible.
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