There are several types of taxes that you will be expected to pay during your residence in France. In addition to the obvious French and home country taxes, you may also be subject to residency and television taxes where applicable. Professionals specializing in expatriate taxes can be found in all countries and may well be worth the time and money if your employer does not provide professional assistance.
Regardless of whether an overseas assignment is permanent or temporary, most countries require some type of tax return from all expatriates. As paying taxes is a highly individualized situation, (depending on such specifics as country/state of origin, type of employment contract, etc.), it is recommended that you inquire about your specific tax liabilities, both at home and in France.
Whether your assignment is permanent or temporary, the USA requires US Federal Tax returns from all US citizens living abroad. Many companies who send people overseas on a temporary assignment provide a professional accounting firm to process their taxes. If provided with a professional firm, you may want to meet with them before leaving the States or on the first return visit to find out what information is needed to process the first foreign tax return. Here is a list of items you may be required to provide:
- If renting out your US house, you might need figures from its purchase, such as down payment and mortgage terms, for depreciation purposes.
- You may be expected to provide a detailed list of dates of when both adult members of the family travelled in and out of the USA, for the entire year of your relocation, as well as the year prior to your relocation, for the verification of foreign residency. If you have a professional accountant, ask them if they have a standard form for recording this information.
- You may be required to fill out a special form if you had US$10,000 or more in a foreign (French) bank account at any time during the tax year.
- You may be asked to submit copies of tax returns for the three years prior to relocation.
- You may be told that you will receive an automatic extension of the filing date for US tax returns until June 15th. This “automatic extension” is deceiving: Payments must be made by April 15th even though you do not have to file until June 15th! You will still have to complete your return by April 15th to know if you owe anything to the IRS. If you wait until June to pay, penalties will apply. It is recommended that you consult your tax advisor concerning extensions.
Each state differs in its tax requirements. If you have a professional accounting firm, they may be able to advise you, but will more than likely not process your state tax return. You should expect to pay state taxes even though you have moved out of the state, depending upon how the state defines “resident”
Tax Preparation and Advice
Please note that in this chapter the professional listings are for informational purposes only and must not be construed as recommendations on the part of the AIT International Club.
Some large accounting firms prepare expat taxes and do so in accordance with the requirements of each country. These firms typically benefit from the fact that they are multinational organizations. If you are not suggested a Tax Accountant by your local hiring firm, you might try these:
15 Allée Jean Jaures, 31000 Toulouse
Contact: Christian LAUBIN
KPMG – FIDAL
9 Ave. Parmentier, BP 92403 ; 31086 Toulouse Cedex 2
Contact: Pascal THIBAULT
French Income Tax (Impot sur le revenue )
The French tax authorities are interested in anyone earning any kind of income in France, regardless of whether you have officially taken up residence in France and/or obtained a “carte de séjour“.
French “déclarations fiscales” (tax returns) are due by March 15th. They can also be entered on line and a recent novelty is that they will arrive partly filled in with your income data. Income tax is paid based on the previous year’s income. If your company does not provide a professional accounting firm for you, make inquiries at the nearest “centre des impôts” (tax center) or at the local “Mairie” (town hall) shortly after your arrival. If your company does provide a firm, you will receive (usually in January) an organizer booklet in English and the assistance of an English-speaking representative to answer your questions. You may be required to list account numbers, bank names and addresses for all home country bank accounts that were open at any time during the tax year. You will not be expected to include a payment when you file your French tax return nor will it be deducted from your pay. The “Trésor Public” (tax department) will bill you. There is an option for “pay-as-you-go”, but you must ask to employ it.
Normally you will be billed in “tiers provisionnel” (three instalments) for the previous tax year. The first two instalments are payable on February 15th (just before you actually file the return) and the third on May 15th. These instalments are estimates based on one-third of the amount from the previous year’s tax return. The balance is due in September, once the tax collector will have received the details for the current year’s return and will have been able to make any necessary adjustments to the balance owed.
Before leaving France, foreign employees must pay any taxes due for the previous year and the year of departure up to the departure date. Payment must be made by a certified bank check; personal checks are not accepted.
Residential taxes (Taxe d’Habitation, Taxe Fonciere, Taxe d’Ordures Menageres)
Homeowners automatically receive two tax bills, the “taxe d’habitation” (residence tax), due October 15th, and the “taxe foncière” (property tax). If renting a house or apartment, you are usually liable only for the “taxe d’habitation“; however, there are exceptions which require that the tenant pay both. The amount of the “taxe d’habitation” depends on the house/apartment size, location, and family situation – since it is dedicated to paying for public services. As a rough guide, a large house situated in Colomiers (a suburb of Toulouse, occupied by a family with two children would be taxed at approximately 850€ per year.
In addition, homeowners, and sometimes renters, are responsible for the payment of the annual “taxe d’ordures” (trash removal tax). The “taxe d’habitation” also includes the “redevance audio-visuelle” (television tax, which is an annual television license). The Property Tax (tax foncière) is paid by property owners uniquely.
VAT or Sales Tax (TVA)
Unlike the USA, (but similar to the system practiced in the UK), French sales tax is usually included in the price of the goods or services purchased retail. Occasionally prices will be quoted as being “hors taxe” or HT with the tax rate and TTC price indicated separately. (Which interests professionals/companies since they are reimbursed the VAT, but include it in the cost billing to consumer.)
The TVA is presently 19.6% on most goods and services. If refurbishing of a house more than two years old (since itsDeclaration d’Achevement, the TVA is 5.6%). Only consumers pay this tax, companies pay the tax but are reimbursed its value as explained above.
Goods purchased for export may be purchased duty-free, outside of duty-free shops, if the amount of the purchase is over 300€ in any one shop. For more details, see “Shopping and Household, Duty-Free Shopping”.
THE LEGAL SYSTEM
American and English law are based upon Common Law, which refers to laws and the corresponding legal systemdeveloped through decisions of courts and similar tribunals (called case law), rather than through legislative statutes orexecutive action (called Civil Law), though these latter are also part of the legal system.
Since the time of Napoléon, the French legal system has been based on Civil Laws, that is, written law contained in a series of codes.
The codes, which are revised from time to time, include, among others, the “code civil” (Civil Code), “code de commerce” (Commercial Code), “code pénal” (Penal Code), “code général des impôts” (Tax Code), the “nouveau code de procédure civile” (Code of Civil Procedure), and the “code de procédure pénale” (Code of Penal Procedure).
The court system in France has many branches. Petty or minor offenses such as traffic violations are handled by the “Tribunal de police” (Police Court). “Délits” (serious offenses punishable by fines and/or imprisonment up to a maximum of 10 years), are judged by courts known as the “Tribunaux correctionnels“, which are a division of the “Tribunaux de Grande Instance“. “Crimes” (the most serious category of offense) for which the law stipulates the most onerous penalties, (up to life imprisonment – there is no death penalty in France), are judged by the “Cours d’assises“.
Disputes between merchants or concerning transactions governed by commercial law are judged by the “Tribunal de commerce” (Commercial Court). In this latter case, if the financial value being litigated is in excess of 4500 euros, the case is heard by the Tribunal de Grand Instance, and a lawyer is required. The lower court will hear plaintiffs directly, but you had better know what you are doing. (NB: It is strongly recommended that you take out Legal Insurance, so ask your Insurance Agent and do not be satisfied with the remark that it “comes with your household insurance”. This latter does not generally cover adequately legal entanglements.)
Cases originating from employment contracts are handled by the “Conseil de prud’hommes” (Labour Court). Disputes with social security organizations, involving such matters as health and retirement coverage, are under the jurisdiction of the “Tribunal des Affaires de Sécurité Sociale” (Social Security Tribunal). Other disputes involving public authorities, such as administrative bodies, are handled by the “Tribunal Administratif” (Administration Court).
Most court decisions can be appealed to higher levels of jurisdiction, although most decisions involving amounts less than 3.800€ (or 3.720€ for decisions of the Labour Court) generally cannot be appealed. The only recourse in such cases is an appeal to the Cour de Cassation (French Supreme Court), located in Paris, which rules exclusively on matters of law and not on the facts. For cases involving amounts greater than 2.800€ (or 2.720€ in the Labour Court), an appeal can be made to a regional “Cour d’appel” (Court of Appeal), which re-examines both the facts and the law.
In turn, decisions of the Court of Appeal may in turn be appealed to the Supreme Court, which would rule only on the issues of law. Rulings made by the Administrative Court may be appealed to an administrative appeals court or, using the “recours en cassation” (supreme appeal procedure), to the “Conseil d’Etat” (Council of State), also located in Paris. When the Supreme Court or the Council of State has given a final ruling on a case, a person who considers that his or her fundamental rights as defined in the European Convention on Human Rights have been violated may institute proceedings within six months before the European Commission of Human Rights, located in Strasbourg.
Trials are heard always in the court of the Defendant. If you take out a case against a defendant, it will be heard in the presiding court related to the Defendant’s legal address. If your lawyer is from a different court jurisdiction, you will be faced with a fee from a local lawyer accepted to the bar who acts as a surrogate. Your lawyer can still plead your case, but the fee must be paid to the surrogate lawyer accepted to the local bar.
With few exceptions, justice in France is rendered by men and women with the status of magistrates, who are trained at the Ecole Nationale de la Magistrature (French National School for the Judiciary). In the Commercial Courts, however, cases are tried before men and women from the business community who are elected by members of that community on the basis of their expertise. Similarly, cases before the Labor Courts are tried before panels containing an equal number of employers and employees. Juries are not used in civil cases, and are reserved only for the most serious category of criminal offences tried before the Cour d’assises.
There are two main categories of magistrates within the French judicial system: the “magistrats du siège” (“sitting judges”) and the “magistrats du parquet” or “magistrats debout” (“standing judges”). The “sitting judges” actually hear and decide cases, rendering decisions, orders, and sentences. The “standing judges” do not make decisions on cases; they represent the interests of society and decide whether criminal cases should be prosecuted. The French Constitution grants the “sitting judges” a status that guarantees their independence and security of tenure. The “standing judges” on the other hand, are placed under the authority of the Minister of Justice.
The “sitting judges” have several functions depending on whether or not they are specialized. Most commonly, these magistrates preside over the courts with general jurisdiction (“Tribunaux d’Instance” and “Tribunaux de Grande Instance“), rendering decisions involving litigation between private parties in civil matters. The Tribunal de Grande instance also has jurisdiction over criminal matters, and when it acts in this capacity it is known as the “Tribunal correctionnel“. A specialized “juge d’instruction” (examining magistrate) investigates alleged criminal offenses, determines whether an alleged offender is to be tried, and decides whether the accused shall be held pending trial. A “juge de l’application des peines” (sentencing magistrate) decides on measures applicable to prisoners with a view to their rehabilitation. These magistrates monitor the enforcement of sentences with probation orders and those involving mandatory community service.
Other specialized magistrates carry out more specific functions. For example, a “juge des enfants” (juvenile court magistrate) decides on the measures to be taken to protect minors in danger and those that may apply to juvenile delinquents. A “juge aux affaires familales” (magistrate for domestic affairs) has wide jurisdiction regarding domestic matters such as divorce and custody of children. The presiding magistrate of a court can also act as a “juge des référés“, and in this capacity the magistrate can render a rapid decision in a summary proceeding in urgent cases. In this capacity, the “juge des référés” hands down provisional orders that are immediately enforceable.
The “standing magistrates” are part of the public prosecutor’s office and represent the State. As their name suggests, they stand when they address the court. The magistrates representing the State before the “Tribunal de Grande instance” are known as the “Procureurss de la République” (public prosecutor or District Attorneys) and “substituts” (assistant public prosecutors). At the Court of Appeals, they are known as the “Procureur Général” (director of public prosecutions), the “Avocats Généraux” (counsel for the prosecution) and “substituts” (assistant public prosecutors). The “standing magistrates” move among various courts.
These public prosecutors defend the interests of the public, and, as noted above, are placed under the authority of the Ministry of Justice. They receive claims and police reports and assess whether a matter should be prosecuted. They also direct the various police departments (both the local police and the national gendarmes) during criminal investigations. They are present at court hearings and prosecute cases to the full extent of the law, including those involving commercial matters.
In France, lawyers have the title of “avocat“. An avocat can act on behalf of a client in almost any court of law. Indeed, in cases tried before a Tribunal de Grande Instance, a party is required to retain an avocat to represent them. If a case is appealed, a specialized lawyer known as an “avoué” must be retained to formally represent the party, although the actual case before the appeals court will be argued by the lawyer.
An “avocat” also acts as a legal and fiscal advisor, and can provide legal advice and assistance on commercial, civil, and criminal matters, as well as provide help with regard to labor law, social security, tax and other issues. An “avocat” can assist in the formation of companies or associations and, among other matters, can inform and advise about questions concerning contracts, business and company law, and family law. He or she can also represent you before administrative agencies.
Other legal professionals include “huissiers” (bailiffs), who perform services such as serving as a legally-recognized witness, delivering summonses, and lawfully seizing property pursuant to a court order. A “notaire” (public notary) is a public official authorized by the Minister of Justice and controlled by the “chambre des notaires“. In France, the conveyance of property is performed by a “notaire“. “Notaires” also have special responsibilities in connection with testamentary and matrimonial acts, inheritance, and drawing up certain “actes authentiques” (legal documents).
English-speaking lawyers practicing at the Bar of Toulouse:
W. Gregory VOSS
63 Rue de la Pomme;31000 Toulouse
Tel: 05 61 23 84 90
54 Bis r Alsace Lorraine; 31000 Toulouse
Tel: 05 61 57 90 86
Docteur en Droit – Avocat à la Cour
Tel: 05 34 31 39 99
18 rue Lafayette; 31000 TOULOUSE
T : 05 62 27 50 53
Notaire (Notary, Sollicitor for purposes of property conveyancing)
When selling a house after having moved to France, you may need to have documents and signatures notarized here. The US Consulate has a public notary on staff, or it may be possible to use the services of a notary public (which in France is actually a kind of lawyer specializing in property transfers, wills, and legal documents of all sorts, etc.)
An English-speaking Notarial Office (Notaire) in Toulouse is:
• Michel Burgan (of Burgan, Benquigui, Hiltenbrand), 40 rue de Metz, 31000 Toulouse, (Tel: 05 62 27 27 27)
Solicitors or Jurists (Conseilleurs Juridiques)
The profession of jurist requires exactly the same diploma as any lawyer and they tend to specialize by type of law (social, labor, intellectual property, real estate, etc.) They may not plead before a court of law since they have not passed Bar exams – so don’t go to them for purposes of litigation. They are therefore typically employed by Corporate Legal Departments or Public Notaries or Lawyers and exercise their profession in all legal matters — except that of pleading before a court. They may be used as Legal Consultants and practice for a fee. So, if you want to start a company then this is the professional that you want to contact. (Though go first to your local Chambre de Commerce and gather whatever information is there – because this is the body that will register your business.)
Note also that some years ago the French government decided to assimilate independent Jurists as lawyers, despite the fact that they had not passed any Bar exam. When seeking a lawyer to represent you in court, it is perhaps wise therefore to assure that they have indeed passed their Bar Exams.
Legal Insurance (Protection Juridique)
Some household insurance policies (called Multirisque Habitation) or car insurance will cover legal protection as well. However, they are likely to be related directly to the object of the insurance (house, car, summer residence, etc.)
It is wise, and costs only 5 to 10 euros per month, to have a separate policy for most cases that might arise. However, there is some litigation that cannot be covered. For instance, if you haven’t been paying your landlord for three months because he refuses to fix a leak in the roof, it is useless to take out Legal Insurance once he takes you to court for eviction. (By the way, in this instance, it is wise to keep paying the rent, since not doing so is a breach-of-contract, but to take your landlord to court, also for breach-of-contract. Tit for tat is not well appreciated in a French court of law.)
Legal insurance (protection juridique) will cover any litigation resulting from shopping or service providers. It will also cover a litigation related to your work (as a salaried employee). However, it will not likely cover litigation such as a divorce or penal offences or should you be pursued by the Fiscal authorities for non-payment of taxes. Each policy should state explicitly what it does not cover, so read it carefully. And, if you have a question regarding the coverage, then by all means ask your insurer before you take it out.
Note also that French legal insurance is based upon the principle of fait déclencheur or trigger-factor. If you have a dispute with someone, don’t try to take out legal insurance after the fact. It will be too late.
Note, also, that you may not have a choice of lawyer. Legal insurers typically select lawyers who accept their fees, which are somewhat less than lawyers typically charge. If you insist on “your lawyer”, then it is possible the insurance policy will only cover part of your expense up to a limited amount imposed by the insurer.
Be sure to read the policy carefully and have a direct relationship with your insurer to be able to ask pointed questions about your coverage, preferably before you contract for the service. Know what you want to be covered for and then find a policy that will suit you.