Self-Assessment: You Are Responsible
The French system is declaratory: it is your responsibility as a taxpayer to determine your obligations, identify the applicable rules – including international tax treaties – and file an accurate return. The French Tax Authorities (Direction Générale des Finances Publiques, DGFiP) does not advise you on how to compute your tax. It audits you after the fact. In France, ignorance of the law is not a defense (nul n’est censé ignorer la loi), and the administration will not proactively point out errors in your favor.
The Household as the Unit of Taxation
In France, income tax is, in principle, assessed at the level of the tax household (foyer fiscal). Married couples and partners bound by a civil partnership (pacte civil de solidarité, PACS) file a joint return – subject to exceptions depending on the applicable matrimonial regime. The composition of the household determines the applicable tax scale through the quotient familial mechanism, which takes into account the number of dependent children. Note that the boundaries of the tax household may differ depending on the tax in question (income tax vs. IFI).
Worldwide vs. Source Taxation
French tax residents are liable to income tax and IFI on their worldwide income and assets. Non-residents are generally taxed only on French-source income. These principles are subject to important exceptions and are modified by the applicable double tax treaties.
Preventing Double Taxation
France has concluded over 125 double tax treaties. These agreements determine which country has the right to tax a given item of income and what relief is available in the other. The relief mechanism varies: some income is exempt in France, some is taxed at a reduced rate, and some gives rise to a foreign tax credit. The outcome depends on the applicable treaty, the nature of the income, and your residency status. There is no one-size-fits-all answer: the treatment must be analyzed item by item.
Withholding at Source & the Annual True-Up
France introduced the pay-as-you-earn system (prélèvement à la source) in 2019, under which income tax is collected throughout the year directly from the source of income, whether that is an employer, a financial institution, or another paying entity. However, the amounts withheld are only an estimate. The actual tax liability is determined by the annual declaration. After filing, the French Tax Authorities compute the difference between what was withheld and what is actually owed, resulting in either a refund or a supplementary payment.
Two Pillars of the Tax Authorities
The French Tax Authorities (DGFiP) is organized around two distinct functions. The assessment function (assiette) is responsible for receiving, processing, and verifying tax returns. The collection function (recouvrement i.e., the Treasury) is responsible for collecting the tax that is owed. If you receive any correspondence from the French Tax Authorities, it is important to understand which arm of the administration issued it.
