All about taxation in France 2024 - plain and simple

France is renowned for its complex but robust tax system, which has a significant impact on both individuals and businesses. There are some changes to the country's tax policy in 2024, which emphasizes the importance of understanding all aspects of taxation. In our piece, we will take a closer look at the current tax system in France and what rates are relevant at the moment.

Taxes in France for individuals

The French tax system for individuals includes several important types of taxes that depend on income, marital status, real estate and asset ownership. Let's take a closer look at the main types of taxes.

Income tax (Impôt sur le revenu)

French income tax is based on a progressive system, where more income means a higher tax rate. The main features of the income tax include the following: in 2024 the rates range from 0% to 45% depending on annual income. The tax is calculated using a “tax unit” system that takes into account the taxpayer's marital status. For families with children, a coefficient of dividing income by the number of units is applied to reduce the tax burden.

The main tax rates in 2024 are:

• Income up to €10,777 - 0%.
• Income between €10,778 and €27,478 - 11%.
• Income between €27,479 and €78,570 - 30%.
• Income between €78,571 and €168,994 - 41%.
• Income over €168,994 - 45%.

Some types of income (dividends, capital gains) go through separate rates from income tax, and are about 30% including social contributions.

Social contributions (Contributions sociales)

This type of tax makes the largest contribution to taxation of individuals. These contributions are levied on most types of income, including wages, business income, investments and pensions.

CSG (Contribution sociale généralisée) is one of the largest social taxes and is levied on almost all income. The rate is around 9.2%.

CRDS (Contribution pour le remboursement de la dette sociale) - an additional contribution to pay off social debt, the rate is 0.5%.

The total social contribution rate for most individuals is about 9.7% of income.

Property tax

This type of tax was established to replace the old wealth tax. The new version applies only to real estate, both in France and abroad, provided that you are a French tax resident. It must be paid provided that the total value of the property in possession exceeds €1,300,000. A progressive rate is also applied here, with properties worth up to €1,300,000 taxed at 0.5% and up to €10,000,000 taxed at 1.5%.

Real Estate Tax (Taxe foncière)

In this case, you have to pay a special levy on the real estate you own, whether it is residential or commercial property. It must be paid every year, and the calculation of the tax is based on the cadastral value and the region where the property is located.

The tax can vary depending on the type of property/ For residential property, the tax rate can vary from 0.2% to 1.5%. Commercial properties are taxed at higher rates. Tax credits or exemptions from this tax may be available for retirees and low-income individuals.

Taxe d'habitation (Taxe d'habitation)

Taxe d'habitation was previously levied on all individuals who lived in rented or owned real estate. However, from 2020 this tax began to decrease and by 2024 it was completely abolished for most French residents. It only remained for owners of luxury housing and secondary homes.

For those who are still liable to pay this tax, the rates depend on the cadastral value of the property and local rates. The average rate is around 0.2-1% of the value of the home.

Capital Gains Tax (Plus-value immobilière)

If an individual sells real estate or other assets at a profit, he/she is liable to pay capital gains tax. 30% is the standard capital gains tax rate, which includes income tax and social contributions. Tax exemption is possible if the property has been in possession for more than 22 years for income tax and more than 30 years for social contributions.

Inheritance and donation (Droits de succession et de donation)

Inheritance and gift tax is levied on the property transferred. The rates depend on the degree of kinship between the testator and the heir:

• For immediate relatives (children, spouses), preferential rates of 5% to 45% apply, depending on the value of the property.
• For distant relatives or persons who are not related, the rates can be as high as 60%.

Vehicle tax

Car owners must pay a vehicle tax (taxe sur les véhicules). The amount of the tax depends on the engine power, the age of the vehicle and its CO2 emissions. The higher the environmental burden of the vehicle, the higher the tax.

Thus, the tax system for individuals in France includes a number of different taxes that depend on income, marital status, property and other factors. France makes extensive use of progressive rates and social contributions, which makes the tax burden high for wealthier citizens, but allows for a high level of social protection.

Tax for legal entities and businesses

France's tax system for legal entities and businesses includes several key taxes that depend on the type of business, its income, structure and region of operation. Let's take a look at the main types of taxes that companies are required to pay.

Corporate tax (Impôt sur les sociétés - IS)

Corporate tax in France is one of the main taxes for companies and in 2024 it is:

• 25% is the standard income tax rate for all companies.
• For small businesses with income of less than 42,500 euros, a preferential rate of 15% can be applied on the portion of profits up to 42,500 euros.
• Corporation tax is calculated based on the company's net profit, which is defined as the difference between income and expenses related to the business.

Value Added Tax (Taxe sur la valeur ajoutée - TVA)

France uses VAT like most EU countries, with several rates depending on the type of goods and services:

• 20% is the standard VAT rate applicable to most goods and services.
• 10% - for restaurants, catering and some types of repair services.
• 5.5% - for foodstuffs, books, medical goods.
• 2.1% - for certain categories of medicines.

Companies are required to register as VAT payers if their annual turnover exceeds a threshold (depending on the sector, this can be between €34,400 and €85,800).

Employer's social contributions (Cotisations sociales patronales)

Companies that employ employees are required to pay significant social contributions on behalf of their employees. These contributions include:
Pension and health insurance contributions. Unemployment insurance contributions.

The combined rate of social contributions for an employer can be up to 45% of an employee's salary.

Local Business Tax (Contribution économique territoriale - CET)

This tax consists of two parts:

• Contribution foncière des entreprises (CFE) is a tax on real estate used in business activities. The amount of the tax depends on the cadastral value of the property and the region where the company is located.
• Contribution sur la valeur ajoutée des entreprises (CVAE) is a value-added tax applicable to companies with an annual turnover of more than 500,000 euros. The CVAE rate is up to 1.5% of the company's value added, i.e. the difference between its income and expenses.

Dividend Tax (Prélèvement sur les dividendes)

Companies that pay dividends to their shareholders are required to withhold dividend tax. In 2024, the tax rate is 30%, of which:

• 12.8% is income tax.
• 17.2% is social contributions.

This tax is withheld when dividends are paid and can be reduced or eliminated for foreign shareholders under international tax treaties.

Inheritance and donation (Droits de succession et de donation)

Inheritance and gift tax is levied on the property transferred. The rates depend on the degree of kinship between the testator and the heir: - For immediate relatives (children, spouses), preferential rates of 5% to 45% apply, depending on the value of the property.

Capital Gains Tax (Taxe sur les plus-values)

If a company sells its assets at a profit, that profit is subject to capital gains tax at a rate of 25%. However, there are tax exemptions for small and medium-sized businesses and for companies that reinvest the profits in their own development.

Professional taxes

Some companies are required to pay professional taxes, depending on the specific nature of their business. For example:

• Financial Transaction Tax (Taxe sur les transactions financières) - applies to large financial transactions.
• Tax on advertising activities - applies to companies engaged in advertising in France.

International taxation

France has signed double taxation treaties with many countries, which allows companies to reduce the tax burden on international income. Depending on the company's structure and international activities, various tax credits or deductions may apply.

In general, France's corporate tax system combines standard corporate taxes with numerous local and social taxes, making the tax burden relatively high. However, the country also offers various tax breaks and incentives for small businesses, investment in research and development, and clean technology.