France is an attractive place for investors, it ranks among the top countries in Europe and worldwide for patent production. France is also home to a number of research and development centers. At the head of this research are exceptionally innovative systems operating in a variety of sectors such as software design, biotechnology, renewable energy, nanotechnology, energy, agribusiness, and the film industry.
- Resident individuals are taxed on their global income, and non-resident individuals are taxed on their individual French-sourced income.
|Income Share||Tax Rate|
|Up to €6,011||0%|
|Between €6,012 – €11,991||5.5%|
|Between €11,992 – €26,631||14%|
|Between €26,632 – €71,397||30%|
|Between €71,398 – €151,200||41%|
- The standard corporate tax rate is 33.33%.
- An additional social security levy of 3.3%, based on the reference amount of corporate tax less EUR 763,000, is applied to companies where income taxable at the standard rate exceeds EUR 2,289,000.
- For small businesses (defined by certain conditions) the corporate tax rate is 15% on the first EUR 38,120 profit and 33.33% thereafter.
- For non-resident individuals, capital gains on the sale of shareholdings representing more than 25% of the capital issued by a company, the registered office is located in France, are taxed at a rate of 45%.
|Default Withholding Rate||Exceptions|
|Dividends||A French corporation that pays dividends to a shareholder who is a non-resident is subject to a 30%withholding tax calculated on gross dividends.||Article 10 of the tax treaty between France and the
U.S. says that dividends paid by a French company to
an individual resident of the U.S. are subject to only a
15% withholding tax in France.
|Interest||Interest paid is generally not subject to withholding tax.|
|Royalties||Royalties that are paid to a non-resident entity have a 33.33% withholding tax rate.||According to Article 12 of the U.S. tax treaty,
royalties are taxable in the country of residence of the
- Value-added Tax:
- Value-added tax (VAT) is a tax levied at every stage of production, distribution and delivery of goods and services. The tax burden is generally taken on by the final consumer.
- The normal VAT rate in France as of January 1, 2014 is 20%.
- The intermediate rate is 10%
- This rate applies to the food service industry, domestic passenger transport, hotel industry, work performed on residential properties, and drugs authorized for marketing but not covered by social security, admission to cultural sporting, and entertainment events
- The reduced rate is 5.5%.
- This rate applies to foodstuffs, medical, and books.
- The “super-reduced rate” is 2.1%.
- This rate applies to pharmaceuticals, newspapers, and periodicals.
- Wealth Tax:
- A wealth tax is payable by resident individuals if the total net value of their worldwide assets (subject to tax treaty provisions) is more than EUR 1,300,000, and by non-resident individuals if the total net value of their assets located in France – with the exception of their financial investments – is more than EUR 1,300,000. The applicable date for determining net assets is January 1 of each year. Wealth tax is assessed per household. Rates vary from 0% to 1.5%.
Société Civile Immobilière
- The most popular way to purchase a home in France is though A Société Civile Immobilière (commonly referred to as an “SCI”), which can be loosely translated as a Private Limited Company for property purposes. The entity is fairly similar to a corporation, because it is under shareholder ownership; however, it is treated like a partnership for U.S. tax purposes.
- An SCI can usually own one or more properties with the purpose of either making them available for free to its shareholders (i.e. personal use) or renting them out.
- An SCI is not intended to be a commercial trading company.
- Advantages of Creating an SCI when purchasing and owning real estate in France:
- Non-resident shareholders in an SCI are not taxed in France because the shares are considered to be movable assets. Thus, they are only taxed in the country of residence.
- Money may be borrowed to make the purchase of property, and in many cases the loan will be set up as a mortgage with respect to the property. In addition to providing liquidity, borrowing can enable the owners of the property to minimize the wealth tax assessed on the property. The debt must be long-term in nature if the debt is to be a long-term solution to the wealth tax.