FRANCE Law and Practice Contributed by: Anthony Roustan and Cédric Dubucq, Bruzzo Dubucq
In general, revenues from a professional activity (employment, business profits of an individual, retire - ment pensions, etc) would be subject to the progres - sive income tax. In contrast, revenues from financial investments (capi - tal gains, dividends, interest) would generally be sub - ject to a flat tax of 12.8%, except where the taxpayer elects to have them taxed at the progressive tax rate. Rental income is generally subject to the income tax rate, and real estate capital gains are subject to a spe - cific tax rate of 19%, which can be reduced with an allowance for length of ownership. Social Contributions France applies specific levies to the different types of social contributions. Contributions on the revenue from a professional activity are levied by the social authorities (URSSAF) and range from approximately 22% to more than 60% depending on the amount and category of the rev - enue. These are typically withheld by the employer or by the pension fund. Revenues derived from passive income (dividends, interest, rental income, capital gains) are subject to a specific social contribution of 17.2%. From 2026, the rate of this contribution is increased to 18.6%, except on rental income and real estate capital gain. Individuals affiliated with an EU/Swiss social security system benefit from exemptions following the CJEU’s de Ruyter decision, and are only subject to a contribu - tion of 7.5%. The social contributions on passive income are levied by the tax authorities, and are generally treated as an income tax for the application of tax treaties, in contrast to the contributions levied on professional income. Family Quotient System In France, taxpayers are taxed as a household. The spouses are taxed together without a possibility to opt out, except for spouses who are physically separated and married under a separation regime.
Children are included in the tax household until 18 years old. They can remain in the household until 21 years old without conditions, or until 25 years old if they are students. The family quotient system ( quotient familial ) divides household income by number of shares reflecting family composition. The revenue of the household is divided by the number of shares to determine the tax rate applicable to the household. This mechanism significantly reduces the tax burden for families with children, and is a distinctive feature of the French system. 2.4 Taxation of Non-Resident Individuals Scope of Taxation Non-residents are taxed only on French-source income, including income from French immovable property, professional activities performed in France, French-source pensions, French dividends and capi - tal gains on substantial participations or French real estate. Withholding Tax Rates Withholding taxes apply as follows: • professional income from an activity performed in France – income tax bracket; • dividends – 12.8%, reducible under applicable treaties; • interest – 0%; and • royalties – 25%. Minimum Tax Rate of Non-Residents For revenues that are subject to the progressive tax rate, non-residents have a minimum tax rate of 20% for revenues below EUR29,579 and 30% for revenues above this threshold. If the application of the tax bracket leads to a higher tax rate, the higher tax rate is applied. This rule takes into account the fact that France cannot have full knowledge of the contribu - tive capacity of non-residents, which depends on their other worldwide revenues. Non-residents can demonstrate that they must be taxed at a lower rate, provided that they disclose their
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