France taxes at source so why do I have to complete a tax return?

Reader question: I will be moving to France this year. I understand France taxes income at source yet I have been told I will also have to make a tax declaration. Is this right?

Many foreign nationals, such as Britons, are used to a system whereby their incomes whether from work, pensions, or savings accounts, are taxed ‘at source’ and if their financial affairs are fairly simple there is no annual tax return to be made.

That has not been the case in France and still is not despite the introduction of tax-at-source in 2019.

An annual tax declaration is still required for most residents because the French system is now a hybrid setup involving tax-at-source alongside some older tax mechanisms.

Older tax mechanisms in France include the taxation of the household unit as a whole (known as le foyer fiscal), with a relative reduction in tax applied depending on family size, as well as various special ways of investing or spending which allow people to benefit from reductions to their declarable income or to obtain deductions from their tax bill.

Most people most make an annual French tax declaration

This means the annual requirement of a tax declaration is still in place for most people apart from a minority with very simple tax affairs who can take advantage of a tacit declaration scheme.

The declaration is needed so the tax office can calculate your real overall situation to make sure you have paid the right amount of tax at source. It is also so it can take into account and check your eligibility for any tax credits.

For the vast majority of people this should now be done online at impots.gouv.fr. Once you have moved to France it is a good idea to look into opening an account at this site, however you are entitled to make your first declaration on paper if you are not set up with this.

It is your responsibility to make a return by the relevant dates, which vary depending on where you live in France.

As mentioned above, in future years if your tax affairs are very simple you will have the option of an ‘automatic’ (tacit) declaration, in which you simply have to take note of information sent to you by the tax office regarding incomes they are aware of. There is nothing to do if this is correct, which will generally be the case if your affairs have not changed from one year to the next.

Note however, that this automatic system does not apply to people with non-French income.

The annual declaration is usually in May or early June, and relates to income from the previous calendar year. This is worldwide income if you live in France, or certain French-sourced income, notably rental income, if you do not. Tax treaties avoid double taxation in the case of some foreign income.

As for tax-at-source, this is taken literally ‘at source’ from French work or pension income, whereas there is a system of regular instalments based on your previous declaration, in the case of certain regular incomes France cannot actually tax at source, such as foreign pensions or income from renting out property.

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