The French tax year runs from 1 January to 31 December.
Husbands and wives or partners of a PACS must file joint returns (except the year of marriage/the year the PACS is signed, where spouses/partners can opt to file separate tax returns for the whole year). Otherwise, separate filing status is not permitted, except under strictly limited circumstances.
French resident tax returns are based on calendar-year income and must be filed, in principle, by mid-May of the following year (the exact filing deadline is confirmed each year by the French tax authorities).
The taxpayers whose main home is equipped with access to the Internet should file their tax return online on the government website.
A fixed EUR 15 fine by tax return will be applied after two breaches, except in particular cases (e.g. the elderly who have no access to the Internet).
Payment of tax
As of 1 January 2019, for French resident taxpayers, a WHT system has been implemented. The scope of income subject to the WHT system is very wide and covers most categories of income: employment income, pensions, replacement income, annuities, self-employment income (industrial and commercial, non-commercial, agricultural), and rental income.
Incomes derived from an activity carried out in France on behalf of a foreign employer in principle constitute French-source incomes that are taxable in France, even if the activity is carried out on an occasional basis or in teleworking. The foreign employer is therefore in principle liable for the WHT.
As of 1 January 2023, if the employee is not covered by a compulsory French social security scheme, pursuant to Article 13 of Regulation (EC) 883/2004 of 29 April 2004, it is possible under certain conditions for the employer to be exempted from collecting the WHT, although the employer will still be required to declare his employee's taxable income in France annually.
For taxpayers who have already filed a French tax return, the French tax authorities calculate the applicable WHT rate to be applied on employment income or the amount of monthly instalments to be paid by taxpayers based on the last tax return submitted by the taxpayers. The WHT rate or the instalment amount is revised each year in September after the filing of the annual tax return. The tax rate applied is an average tax rate calculated for the household. It is possible to request the application of an individualised tax rate for each spouse. It is also possible to request a modulation of the applicable WHT rate in case of change of personal situation or income.
When a tax rate is not available (e.g. for taxpayers who have never filed a French tax return), employers apply a neutral tax rate on compensation, depending on the level of income. It is possible to request a personalised WHT rate by filing a form (2043 Form).
Considering the risk of potential penalty, specific advice from a tax advisor is required to request or adjust the applicable WHT rate.
The filing of an annual tax return is still required. However, since 2020, the declaration is simplified for certain taxpayers. The automatic declaration is a new declarative mode allowing certain tax households to benefit from automatic validation of their tax returns, without any action on their part, as long as the information pre-filled and known to the tax authorities is accurate and exhaustive for the calculation of income tax. For the tax households concerned, the absence of filing will now be considered as a declaration. To be eligible, households must meet the following two conditions:
- They should have been taxed the previous year only on income pre-filled by the tax authorities.
- They should not have reported any changes in status (address, marital status, or creation of a withholding tax account) the previous year.
If the final tax liability per the annual tax return is higher than the withholding, the taxpayer is required to pay the balance to the authorities, in principle spread from September to December. If the tax withheld is more than the computed tax on the tax return, the French authorities will refund the difference.
For non-resident taxpayers deriving income from employment and professional activities exercised in France, a WHT mechanism is applied; tax at flat rates of 0%, 12%, and 20% is withheld at source for employment compensation. An annual income tax return is required if the income subject to WHT falls into the 20% WHT bracket and additional tax may be due.
In addition, there is a tax withholding obligation on French-source stock options (granted from 20 June 2007) and free share award gains realised as of 1 April 2011 by non-resident taxpayers of France.
Other French-source income may also be subject to WHTs and annual reporting.
Tax audit process
The French Tax Administration can verify the accuracy and correctness of the tax return and can provide a control on the document provided. The French Tax Administration analyses the consistency between declared income, the financial situation, and the household's lifestyle.
When disbursements exceed receipts, the difference is considered hidden income unless the taxpayer responds satisfactorily to a request for clarification or justification.
Statute of limitations
The statute of limitations in France is, in general, for three years (period called délai de reprise). It has been extended for one year for the year 2018 ('tax holiday year').