France – Individual taxpayer: here are a few changes to the tax law that may impact you.
A few changes were made to the French tax law as part of the 2023 budget that may impact how much tax you owe on your 2022 income or the amount of refund that you may get. Here is a sample of what’s new for your 2022 tax return preparation and filing.
- If your 2022 income were taxed in accordance with the law and regulations that were applicable in 2021, you’d have paid more tax. This is because the 2023 finance law increased the French income tax bracket by 5.4%.
- You’re required to report to the French tax administration before June 30, 2023, real estate properties other than your principal residence that you own. You may web-file this report at www.impots.gouv.fr. This information will help the Administration determine the properties that are taxable now that the property tax on your principal residence has been repealed.
- You may write off more expenses for the business use of your personal car. This is because the optional standard mileage rate that you should use in computing the deductible costs of operating your automobile for business, charitable, medical, or moving expense purposes has been increased.
- Some of your tips are exempt from income tax if your salary for the month doesn’t exceed 1.6 times the monthly minimum wage. Indeed, if you work in contact with customers, the tips that you received in 2022 and will receive in 2023 are exempt from income tax, social contributions, and social security taxes. The tips that we’re referring to here are money that customers give to you or to your employer who redistributes it to the staff.
- You may now work for up to EUR7,500 worth of overtime or additional hours work income tax free. Before 2022, the threshold was EUR5,000.
- You may write off your car sharing expense for commutes between your home and your office if you itemize deduction. These expenses are now considered ordinary and necessary professional expenses that you can deduct if you can substantiate them.
- If you are doing business in the private sector, you may offer to your non-exempt employees (employees other than the ones on forfait jour) and who don’t have an overtime or additional hour work savings account, “compte épargne-temps (CET)”, to convert into salary and wages their day-offs or their unused work hour reduction (RTT , reduction du temps de travail). These days off and RTT must be converted between January 1, 2022 and December 31, 2025. You may convert to salary and wages as many RTT as you wish as long as your employer approves of it.
- You may get a credit of up to EUR3,500 if you paid someone to care for your child under 6 while you’re working. Under previous legislation, the maximum amount of credit for dependent care expense that you may claim was EUR2,300.
- You may claim a tax credit of 66% of the amount that you donate from January 1, 2022 to municipalities, an inter-municipality forest management association, or a joint forest management association and forestry union groups for the following purposes:
> The maintenance, renewal or regeneration of woods and forests in a sustainable manner as part of a public interest program that aims at preserving the natural environment; or
> The acquisition of woods and forests as part of an approved green project.
The amount of the credit is capped at 20% of your taxable income. You may also claim the tax credit under the same conditions if you make the donations through endowment funds whose management is disinterested.
In 2022, French taxpayers reported EUR1.3 trillion of revenue, up from EUR1.2 trillion the year before (+5.30%). Salaries and wages are their main source of income with 50.97% of the total revenue that they reported on their 2021 tax return. Pensions and annuities are their second largest income stream with 25.41% of the total revenue that they reported on their 2021 tax return. They paid EUR80.8 billion of individual income tax on this income (6% of their revenue), a 9.3% increase compared to 2020. The increase of the income tax paid is consistent with the increase of the French taxpayers’ revenue in 2021 and the income tax abatement for low-income families in 2020. The French taxpayers in the Paris Ile-de-France region paid 35.82% of the EUR80.8 billion income tax that the administration levied. The second largest contributors are the Auvergne Rhône Alpes region taxpayers with a contribution of 10.72% of the total tax collected.
About 40.3 million French households filed a tax return in 2022. More than half of them pay no income tax, 45% of them pay an income tax, and 8.20% of them got a refund. Of all taxpayers, the lowest income earners received an average refund of EUR33 whereas the 10% wealthiest paid EUR15,000 of income tax on average.