IT Contracting in France - Money and Tax
Profile written by Matt Walters of Capital GES (Updated September 2016).
France has historically been very open to foreign contractors, and its large technology centres near Paris and in Sophia Antipolis provide numerous contract opportunities. France has much to offer the foreign contractor in the way of culture, gastronomy, sports activities and tourism; while its proximity and close transport links to the UK allow for an easy return home.
You do not need to register for tax in France, but you must ensure you file your annual tax return on time each year. It is your responsibility to obtain and complete a tax return prior to deadline, usually in May.
II. Taxation in France
The French tax year is the calendar year, and tax returns must be filed between May and June of the following year. Tax rates are banded between 0% and 41% dependent on income.
Once a tax return has been filed you will obtain your tax number “Numéro fiscal”, which you will find on your tax assessment “Avis d’imposition”.
In France, income tax is imposed on the household rather than on each of the spouses separately and, in fact, separate assessment is made in exceptional cases only. Unmarried individuals who live together and have concluded a partner contract (known as a PACS) are generally treated in the same manner as spouses for income tax purposes. There is no definition of taxable income, but it generally encompasses employment income, business income, benefits in kind, investment income, certain types of capital gains, income from immovable property, etc.
French tax allowances and credits
i. Professional costs
The 10 % tax deduction is a standard percentage amount allowed by the French tax authorities if you do not choose the option of the real effective costs. This is intended to take into account the most common professional costs incurred while working in France.
ii. Household expenses
a. Taxpayers who hire domestic help are entitled to a tax credit equal to 50% of the salaries paid; the credit may not exceed EUR 6’000.
b. General deductions for the costs of child’s education.
Under certain circumstances and up to certain limits, the taxpayer may deduct legally-enforced alimony and maintenance payments.
III. Social Security
In principle, French employers withhold French social security contributions for employees working in France. The calculations for social security are complicated with many variables depending on levels of earnings but, in simple terms, employees’ contributions amount to approximately 20%-23% and employers’ contributions to approximately 45% of the gross salary (different caps are applied). These contributions cover health, old age, widowhood, unemployment insurance and usually accident insurance. Employees’ contributions are tax deductible.
Social security must be paid on your full salary in France. You can either contribute to the French social security system or, in cases where your employer is a non-resident company in France, to the social security system of the country of your employer. In the latter case, your employer will apply for an E101 certificate to show that you are contributing to an EU country outside France. The E101 is initially valid for 12 months and can be extended thereafter upon agreement of the receiving and the sending country.
Care must be taken here, and it is worth taking advice, as detachment by means of an E101 may not be the best solution in all cases due to either a) the duration of your intended stay in the country, b) the level of cover provided, or c) the cost of said contributions. It is also worth noting that, under the EU social charter, social security contributions made within an EU country will count towards your time stamp for the UK.
IV. Work permits
Citizens of EU countries, with the exceptions of Romania and Bulgaria until December 31st 2013, do not need a work permit to take up employment in France. This also goes for citizens of Switzerland, Liechtenstein, Iceland and Norway. Any individual working more than three months requires a residence permit.
Citizens of all other countries must go through a full registration and work permit process. A work permit can only be obtained if no suitable candidate can be found in France or another Member State of the EU.
Capital GES is an international payroll and contract-management company providing tailor-made tax planning services to contractors working overseas. For more detailed information on your personal situation, please contact Capital on +41 32 732 97 00.