France constitutes one of the main destinations where Polish citizens go to work – both to work in a French company and as a part of a secondment. Unfortunately, they are very often unaware that receiving income in France is connected with the obligation to settle and pay tax in that country. This requires knowledge of the basic principles concerning the French tax system. Below, we will try to explain you this topic.
1. When it’s necessary to pay income tax in France?
a) Tax residence
The concept of tax residence is of a key importance for further deliberations. Tax residence constitutes the place where the taxpayer is obliged to pay tax. Thanks to that, the taxpayer knows in which country he/she should pay tax. Tax residence is determined by the provisions of tax laws – both Polish and foreign ones – as well as by the provisions of double taxation conventions. Poland has concluded such agreements with almost all States.
The certificate of residence confirms tax residence. It’s an attestation of the taxpayer’s residence for tax purposes, issued by the competent tax administration of the State of the taxpayer’s domicile (Article 5a, point 21, of the Personal Income Tax Act of 26 July 1991 (i.e. Official Journal of 2020, item 1905, as amended), hereinafter referred to as the Income Tax Act).
It should be emphasised that having a tax residence in a given country isn’t related to having citizenship of this State. In other words, being a citizen of a country isn’t necessary to be its tax resident.
b) Polish tax residence
A Polish tax resident is a person with a domicile in Poland. According to Article 3(1a) of the Income Tax Act, an individual is considered to be a person residing in the territory of the Republic of Poland if:
- he/she has a centre of personal or economic interests (centre of vital interests) in Poland either
- he/she stays in the territory of Poland for more than 183 days in a tax year.
The above conditions are alternative. Therefore, the fulfillment of one of them is sufficient to consider a given person as a Polish resident.
c) French tax residence
In order to determine who is a French tax resident, it’s appropriate to refer to Article 4 B of the French Tax Code. According to this provision, a person who can be considered a French tax resident shall fulfil at least one of the following conditions:
- he/she has his/her home or principal residence in France;
- he/she carries out a professional activity in France, paid or unpaid, unless he/she justifies that this activity is conducted on an additional basis;
- he/she has a centre of economic interests in France.
d) Double taxation convention with France
A Polish tax resident who has obtained taxable income in France doesn’t have to worry that it will also be taxed in Poland. In order to prevent it, the Government of the Polish People’s Republic and the Government of the French Republic concluded on 20 June 1975 the agreement on the prevention of double taxation with respect to taxes on income and capital (OJ 1977, No 1, item 5). It was modified by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, signed by Poland and France on 7 June 2017.
The agreement adopts the principle that income from employment, earned by a person residing in a given country, is taxable only in that country. On the other hand, if the work is performed in other State, the income is subject to taxation in that second State (Article 15(1) of the Agreement). This principle isn’t absolute. Income that a person residing in one country earns from employment in the other country is taxable only in the first State if:
a) a person stays in the other country during one or more periods not exceeding a total of 183 days in a given tax year,
b) salaries are paid by the employer or on the behalf of the employer who hasn’t a residence or a head office in this other country,
c) wages aren’t borne by a permanent establishment or a fixed place of business which the employer has in the other State (Article 15(2) of the Agreement).
In order to benefit from the exception, all of the above-mentioned conditions must be fulfilled jointly. The absence of any of them excludes the possibility of taxing income earned abroad in the country where the taxpayer resides.
In conclusion. As a general rule, a person residing in Poland and earning income here should pay tax in Poland. However, if he/she obtains income in France, that income should be taxed in that country. Only if the three conditions indicated above are fulfilled jointly, income earned in France by a person residing in Poland will be subject to taxation in Poland.
2. Revolutionary change
From 1 January 2019, the tax system in France has changed revolutionary. It was decided to introduce the principle: Pay As You Earn (PAYE), i.e. the withholding tax. Therefore, employers were obliged to deduct advances on income tax (l’impôt sur le revenu) from employees’ salaries. Before the change, the French tax system was based on the self-reliance of citizens. Workers were obliged to declare income and pay taxes to the tax authorities themselves. Employers didn’t participate in dealing with and payment of taxes.
3. How to submit a tax return in France?
a) First declaration
The taxpayer who has never settled in France before should complete the form: Déclaration des revenus. It’s available at the branches of the tax office (SIP – Services des impôts des particuliers – for residents and to SIPNR – Service des impôts des particuliers non-residents – for non-residents) and on the website: www.impots.gouv.fr (Cerfa n°10330*16 Autre numéro: 2042). The completed and signed form shall be sent to the appropriate tax office.
b) Further declarations
In subsequent years, the tax office sends the taxpayer an already completed declaration (déclaration préremplie). . The declarations are sent in the spring, usually between April and May.
It should be emphasised that the documents sent by the tax office are partially completed. The taxpayer must verify their content and, if necessary, correct them, as well as enter any changes concerning data (for example, change of adress or family situation).
c) Online declaration
From 2019 the preferred way of submitting tax returns in France is online. However, there are some exceptions to this rule. Taxpayers whose principal residence isn’t equipped with Internet access can still complete the declaration in paper form. Moreover, the obligation to submit declaration online is exempted in the event that, among others, taxpayers reside in an area without access to mobile service (the exemption is in force from 2024), as well as taxpayers who don’t know how to use the Internet, even if they have it at home. The latter exception concerns in particular elderly, disabled or dependent persons.
When submitting a tax return online, a taxpayer must log in to his/her tax website. The following identifiers are needed for this:
- Numéro fiscal de télédéclarant – tax indentification numer assigned by the tax office at the first settlement
- Password
After logging into the system, the tax return will open. It’s necessary to verify it, make any changes or corrections, and then electronically sign and sent it.
d) French tax declaration
Form 2042, used to settle personal income tax, is quite complex and contains a lot of information necessary for a proper settlement of tax. This data include, among others, the taxpayer’s address, his/her marital status, family situation, income (both from employment and other sources), tax deductible expenses, tax reliefs and credits, foreign revenue. Such a wide range of information is justified by the method of calculating income tax in France. When calculating it, the annual household income (foyer fiscal) is taken into account, i.e.: earnings (revenus), pensions (retraites), gains from certain savings (revenus des valeurs et capitaux, plus values et gains taxables), gains from owned immovable properties (revenus fonciers) and expenses allowing to reduce the tax base.
The French tax system provides for the possibility of reducing the taxpayer’s income by 10% or more (déduction forfaitaire – lump sum allowance) if the taxpayer declares and documents real professional costs (frais réels). The French tax system also provides for other deductions and numerous reliefs allowing to reduce the amount of tax due. These include: allowance for children’s education, allowance for hiring care for children or the elderly, allowance for family members’ maintenance costs, benefit for charitable donations, relief for expenses for the purchase of ecological heating installations. The taxpayer who benefits from the allowance must remember that the tax office may order him/her to document the expenses incurred.
The amount remaining after deductions is the taxable income (revenu fiscal de référence). It’s divided by the so-called sum of the fiscal parts (parts “N”), which consists of the household (foyer fiscal). It’s assumed that one person costitutes 1 part, spouses and persons remaining in a registered partnership (so-called PACS) are 2 parts, the first child constitutes 1/2 part, the second child is also 1/2 part and each subsequent child is 1 part. The family quotient (quotient familial) is obtained in this way.
The amount received is taxed progressively, in accordance with the tax table in force for a given year.
e) Deadlines for submitting tax returns
The deadline for submitting tax returns isn’t predetermined by the French legislator. Each year, the tax office publishes time limits for filing tax declarations.
4. Declaration in Poland
Income obtained in France and taxed there is exempt from tax in Poland. However, this doesn’t mean that the taxpayer is exempt from the obligation to submit his/her annual tax return to the Polish tax office. In the event that he/she earned income both in Poland and in France, he/she will have to submit a completed PIT-36 form with the PIT/ZG attachment to the competent tax office. However, he/she doesn’t have to worry that income obtained in France will be taxed in both countries. Indeed, the double taxation convention concluded with France provides for an appropriate mechanism protecting the taxpayer againts double taxation of his/her income. This is the so-called method of exemption with progression. As a result of its application, income earned abroad is excluded from the tax base in Poland. However, its amount is taken into account when determining the tax rate on other income subject to taxation in Poland according to the tax scale.
5. Legal notice
The study is a work within the meaning of the Act of 4 February 1994 on Copyright and Related Rights (OJ 2006, No. 90, item 631, consolidated text, as amended). Publishing or reproducing this study or its part, quoting opinions, as well as disseminating in any other way the information contained therein without the written consent of Crede sp. z o.o. is prohibited.
