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Tax in France for Non-Residents in 2023: The Ultimate Guide

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This article will discuss the tax in France for non-residents and the French tax system. We will also discuss tax-friendly jurisdictions where you can go to reduce your tax liabilities in France.

France is renowned for many things. Unfortunately, this includes high taxes. Most Western European countries fall in the same high-tax category, and that’s why people have (mistakenly) associated entire Europe with a hefty tax bill. That’s not true, though.

Believe it or not, Europe, especially Eastern Europe, still has some hidden gems where you can enjoy the high-standard European vibe while paying a fraction of the tax you’d pay in a country like France.

Eager to know your options? Read this article to learn how to establish tax non-residency in France, and get in touch with us today to kickstart your high-quality low-tax life.

Tax in France for Non-Residents

France – Country Overview

Located in Western Europe, France (officially the French Republic) also comprises overseas territories in the Americas and Pacific, Atlantic, and Indian Oceans.

The capital and largest city is Paris. It’s also the cultural and economic center of the country. The current population of France is 65,649,139, and the official language is French.

Historically, France has always been one of the most important nations in the West. It’s also one of the oldest countries in the world.

Its rich history is reflected in its art, museums, culture, architecture, and way of life. France boasts 41 UNESCO World Heritage sites. It’s also one of the most attractive tourist destinations in the world, with millions of people visiting the country annually to catch a glimpse of the Parisian way.

As one of the five permanent members of the UN Security Council, the country has the right to veto decisions put to the council, making it one of the most influential and powerful nations to be reckoned with.

France is a founding member of the European Union and the Eurozone. It’s also part of NATO and the OECD among other global institutions.

France – Economy

France boasts a highly developed economy that has consistently been among the largest economies in the world. France is among the top ten largest economies by PPP and nominal GDP.

The country’s economy is also highly diversified, with the services and the industrial sector contributing heavily to it. France is also one of the biggest manufacturing countries in Europe.

In essence, France’s economy has consistently been one of the most stable economies in the world.

France - Country Overview

Tax Non-Residency Criteria in France

France categorizes taxpayers into two categories – residents and non-residents. You will be considered a resident in France for tax purposes if you meet at least one of the following criteria:

  • Your primary residence (home) is in France.
  • Your primary professional activity is exercised in France.
  • You spend 183 days or more a year in France (consecutively or otherwise).
  • The center of your economic activity is in France.

If you don’t meet any of the criteria mentioned above, you will be considered a non-resident for tax purposes in France.

Tax Non-Residency Criteria in France

Tax System for Non-Residents in France

French Sourced Income

French tax residents are taxed on their worldwide income. In contrast, French non-residents pay taxes only on their France-sourced income. This generally includes employment income, self-employment income, property income, dividends, capital gains, and pensions (if the debtor is France-based).

PAYE System

Most French residents must file an income tax return in France. However, a few years back, the French government introduced Pay-As-You-Earn (PAYE) system. According to PAYE, taxpayers will be taxed monthly, at the source of the income, instead of filing an annual tax return. For example, an employee’s taxes will be withheld and filed by their employer.

Income subject to the PAYE system also includes retirement and rental income.

Household Taxation

In France, taxation primarily revolves around household or family units. Tax residency is determined for each household member. You can be considered a French tax resident even if your spouse or civil partner isn’t.

Below is a summary of taxes in France for non-residents.

Tax Rates in France for Non-Residents

Income Tax in France for Non-Residents

French taxes can go as high as 45%. Fortunately, non-resident tax rates are relatively lower.

Due to the PAYE system, most non-residents don’t need to file a French income tax return. The withholding tax is subjected to progressive rates of 0%, 12%, and 20%, depending on the total taxable income.

Where the withholding tax rates don’t apply, French non-residents pay an income tax rate of 20% on their French-sourced income. French-sourced income over €27,519 is subject to an income tax rate of 30%.

Capital Gains Tax in France for Non-Residents

French non-residents pay tax only on French-sourced capital gains. For French non-residents, capital gains are taxed at the same progressive rates applicable to residents.

Capital gains tax rates in France vary based on the nature of the gains. Capital gains from the sale of securities are taxed at a flat rate of 30%. The sale of shares is taxed at 34.5%. Whereas capital gains related to real estate are taxed at 34.5%.

Inheritance and Wealth Tax in France

Non-residents pay a wealth tax only on their French-located property. French Wealth tax rates vary from 0.5%to 1.50%.

France also levies inheritance and gift taxes. French inheritance tax rates depend on the residence status of the deceased and the beneficiary.

Tax Rates in France for Non-Residents

Can Non-Residents Benefit from International Tax Treaties in France?

France has double taxation avoidance agreements with over 100 countries. According to the French tax system, international tax treaties executed between France and other countries precede national legislation. However, each tax treaty may establish different rules regarding tax residency, so it’s essential to refer to the relevant tax treaty.

Can Non-Residents Benefit from International Tax Treaties in France

European Countries with Tax-Friendly Regimes

Believe it or not, Europe still has some pretty amazing spots where you can live a high-standard life while paying fewer or zero taxes. You just have to look closely – or you can contact us, and we’d do it for you.

Portugal

You may be surprised to see Portugal here. After all, taxes in Portugal can get pretty high (up to 28% and 48% depending on the nature of income). However, Portugal has a Non-Habitual Residence (NHR) program, primarily aimed at highly qualified foreigners to become Portuguese tax residents while legally reducing or eliminating their tax liabilities on most foreign-sourced income for ten years.

Foreign-sourced income (salaries, dividends, royalties, capital gains, etc.) of NHR holders is tax-exempt. Moreover, NHR holders don’t pay any gift, inheritance, or wealth tax in Portugal.

The NHR program makes Portugal an excellent second residency option despite its high tax rates.

To read more about the NHR program, you can take a look at our article on how to pay zero tax in Portugal as a Non-Habitual Tax Resident.

Portugal also has an excellent Golden Visa program. If you’re interested, you can read our ultimate guide on the Portugal Golden Visa.

Italy

Like Portugal, Italy’s standard tax rates are pretty high (up to 43%). However, the country offers a lump sum tax program to high-net-worth individuals who can pay €100,000 per year as their entire tax obligation.

Foreigners seeking Italy’s lump sum tax program must move to Italy, become a resident and pay €100,000 annually for up to fifteen years (or the term of their enrolment).

As a result, they’re be exempt from local tax obligations and inheritance, wealth, or gift taxes in Italy.

The country also has an Italian Golden Visa program for people interested in acquiring EU residency through investment.

Georgia

If you’re up for moving your tax residency to an Eastern European country, Georgia should be one of your top choices. It’s a beautiful country with a straightforward and territorial tax regime, meaning that foreign income is tax-exempt for Georgian residents.

The following are the Georgian tax rates:

  • Income Tax: 20%
  • VAT: 18%
  • Corporate Tax: 15%t
  • Capital Gains and Interest: 5%
  • Property Tax: 1%

Not only is Georgia an excellent second residency option, it’s also a pretty great spot to plant a business flag, considering its foreigner-friendly laws and ease of banking.

European Countries with Tax-Friendly Regimes

Go Where You’re Treated Best

France is a wonderful country. Beautiful landscape, breathtaking architecture, charming lifestyle, excellent wine, and even better cuisine – at a glance, the country seems to be perfect.

The French social security system and the perks it offers are among the best in the EU. However, all that comes at the cost of high taxes.

Fortunately, many other European countries offer the same (if not better) quality of life with friendly tax regimes. If paying nearly half of your income in taxes makes you shudder, you may want to look at those options.

Or better yet, you can reach out to us. At Nomad Capitalist, we’ve helped thousands of clients go where they’re treated best. We would love to do the same for you.

Tax in France for Non-Residents in 2023: The Ultimate Guide FAQ

Is France a high-tax country?

Yes, income tax rates in France can go up to 45%, making it one of the countries with the highest taxes in the world.

Does France have a tax treaty with the US?

Yes, France has a tax treaty with the US and over 100 other countries.

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