French Tax Law

Sources of French Tax Law

French tax law (droit fiscal) is codified in the General Tax Code (Code général des impôts, CGI) and the Book of Tax Procedures (Livre des procédures fiscales, LPF). The constitutional framework includes Article 13 of the Declaration of the Rights of Man and of the Citizen (1789), enshrining the principle of equality before taxation (égalité devant l’impôt) and the requirement that taxation be consented by representatives of the people. The annual Finance Law (Loi de finances) adopts the Budget and amends tax provisions. The Constitutional Council (Conseil constitutionnel) exercises review over tax legislation for conformity with constitutional principles. Tax disputes are adjudicated by the administrative courts (tribunaux administratifs, cours administratives d’appel, Conseil d’État) for direct taxes and the judicial courts (tribunaux judiciaires, cours d’appel, Cour de cassation) for indirect taxes and enforcement matters. The Direction Générale des Finances Publiques (DGFiP) administers tax collection and audits.

Individual Income Tax

The impôt sur le revenu (IR) applies a progressive rate schedule. For 2023 income, the brackets are: 0% up to €10,777, 11% from €10,778 to €27,478, 30% from €27,479 to €78,570, 41% from €78,571 to €168,994, and 45% above €168,994. The family quotient (quotient familial) divides taxable income by the number of household shares (parts), reflecting family size: one share for a single person, two shares for a married couple, and one-half share per dependent child, with a maximum tax advantage per half-share capped at €1,759 (2023). The 30% flat tax (prélèvement forfaitaire unique, PFU) applies to investment income, including dividends, interest, and capital gains on securities, comprising 12.8% income tax and 17.2% social contributions (CSG, CRDS, and other levies). A deduction of 10% for employment expenses is automatically applied for salaried employees, with an option to deduct actual expenses. CSG (contribution sociale généralisée) and CRDS (contribution pour le remboursement de la dette sociale) are levied at 9.2% and 0.5% respectively on earned income, with partial deductibility for CSG.

Corporate Income Tax

The standard corporate income tax rate (impôt sur les sociétés, IS) is 25% from 2022. Small and medium enterprises benefit from a reduced rate of 15% on the first €42,500 of profit, subject to conditions including turnover below €10 million and share capital fully paid up. The social solidarity contribution (contribution sociale de solidarité) at 3.3% of the IS amount applies to large companies with turnover exceeding €76 million. The participation exemption regime (régime mère-fille) under Articles 145 and 216 CGI exempts dividends received by a parent company from its subsidiaries, subject to a 5% quota for costs and charges. Tax consolidation (intégration fiscale) allows a French group to aggregate the taxable results of its 95%-owned subsidiaries. Exit taxation applies to unrealised gains on assets transferred abroad by companies migrating their tax residence. The 3% tax on distribution (taxe sur les distributions) applies to amounts distributed as dividends.

Value Added Tax

The standard VAT (taxe sur la valeur ajoutée, TVA) rate is 20%. An intermediate rate of 10% applies to catering, transport, and certain services. The reduced rate of 5.5% covers food, energy, and transport. An ultra-reduced rate of 2.1% applies to medicines reimbursed by social security and the press. The TVA system follows the EU VAT Directive. The TVA credit mechanism allows businesses to recover input VAT. The auto-entrepreneur regime provides a simplified TVA regime for micro-businesses, with a TVA franchise de base exempting businesses below certain turnover thresholds.

Wealth Taxes

The real property wealth tax (impôt sur la fortune immobilière, IFI), introduced in 2018, replaced the solidarity tax on wealth (impôt de solidarité sur la fortune, ISF). IFI applies only to net real estate assets exceeding €1.3 million, with a progressive scale from 0.5% to 1.5%. Financial assets (shares, bonds, cash) are excluded from the tax base, unless held through real estate vehicles. The annual tax liability is calculated on the net taxable value of real estate assets, subject to a cap limiting the total of IFI and income tax to 75% of the taxpayer’s income.

Local Taxes

The contribution économique territoriale (CET), comprising the cotisation foncière des entreprises (CFE) and the cotisation sur la valeur ajoutée des entreprises (CVAE), replaced the taxe professionnelle. The taxe foncière is levied on built (taxe foncière sur les propriétés bâties) and unbuilt (taxe foncière sur les propriétés non bâties) property. The taxe d’habitation on principal residences is being phased out, having been eliminated for 80% of households by 2023.

Tax Procedure

The DGFiP conducts tax audits (vérification de comptabilité for businesses, contrôle fiscal général for individuals). Taxpayers have the right to be informed of the audit procedure (débat oral et contradictoire) and to appeal assessments. The Commission départementale de conciliation provides mediation.