France's 2021 Budget & Tax

Now that the budget has been approved, what are the 2021 rates and rules for French income tax, social charges, wealth tax and taxe d’habitation?

The French budget was approved at the end of 2020. While it does not contain any significant tax reforms, if you’re living in France make sure you’re aware of the key 2021 tax rates and rules for income tax, social charges, wealth tax and taxe d’habitation.

After initially being realised on 28 September and then debated by parliament, the French budget for 2021 was approved by the Conseil Constitutionnel on 29 December 2020.

Unsurprisingly, this year’s budget is focused on providing a stimulus package to help the economy in the context of Covid-19. It contains tax reductions for French companies to increase their competitiveness. State support is provided to help train young people in strategic fields or employees who are working part-time. Additional financial support is also given to the most vulnerable populations. The stimulus package also promotes a green recovery by, for example, incentivising energy efficient renovations or promoting a green transition for the French agriculture.

The only modification that will directly affect retired expatriates is the indexation to income tax rate bands.

French income tax

Income tax rate bands and scale rates for income received in 2021:

Net income	Tax rate
Up to €10,084	Nil
€10,084 – €25,710	11%
€25,710 – €73,516	30%
€73,516 – €158,122	41%
Over €158,122	45%

French social charges

There are no changes to social charges for 2021 income, so they are:

9.7% for employment/self-employment income
9.1% for pension income
17.2% for investment income (including rental income)

Real estate wealth tax in France (IFI)

The €1,300,000 threshold for the property wealth tax Impôt sur la Fortune Immobilière stays in place for 2021 and there are no changes to the scale rates of wealth tax either. The 75% limitation also remains in place.

Assurance-vie

As we’ve seen in previous years, some amendments were submitted to restrict the tax benefits of Assurance-vie policies. However, these were not included in the final budget text and so there are no changes to the income tax or succession tax treatment of these beneficial arrangements.

Taxe d’habitation

The 2021 Budget did not put an end to the taxe d’habitation reform. The remaining 20% of households, who did not benefit from a suppression of this annual property tax will have it lowered by 30% in 2021 and then by an additional 65% in 2022.

The taxe d’habitation should be completely removed on main residences in 2023.

Reviewing your financial planning for 2021

Although there have not been any relevant tax reforms this year, it is always a good idea to review your tax and financial planning from time to time to ensure your arrangements are up to date and you are taking advantage of the tax planning opportunities the French regime has to offer.

Since the France tax regime is complicated and very different from the UK’s, you need specialist advice to ensure you get it right. How you hold your assets in France can make a significant difference to how much tax you pay, as well as how you can pass them to your heirs. Blevins Franks has over 40 years of experience helping UK nationals with effective cross-border tax and estate planning solutions in France.

Contact your local office for personalised tax planning advice

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.