Living in France: What about taxes, insurance and inheritance tax?
- 29.05.2025
- 163 Views
Living in France: Navigating Taxes, Insurance, and Inheritance Tax
Relocating to France — whether for a new adventure, a serene retirement, or professional pursuits — is an exciting and life-changing experience. However, understanding France’s complex system of taxes, insurance, and inheritance regulations is essential for anyone considering a permanent or long-term stay. This comprehensive guide delves into these foundational aspects of life in France, providing you with expert insights, actionable information, and detailed explanations to help you make sound decisions and avoid costly mistakes.
Table of Contents
- The French Tax System: An In-Depth Overview
- Fiscal Residency in France: Are You a French Tax Resident?
- Income Tax in France: Earning, Declaring, and Paying
- Social Charges and Social Security Contributions
- Property Taxes: Taxe d’Habitation and Taxe Foncière Explained
- Capital Gains Tax: Selling Property and Assets
- Insurance in France: Health, Property, and More
- Inheritance Law and Inheritance Tax in France
- Estate Planning in France: Tools and Strategies
- Practical Tips, Case Studies, and Frequently Asked Questions
1. The French Tax System: An In-Depth Overview
France’s tax system is well known for its intricacy and rigor, combining both national and local taxes across a variety of categories—income, social charges, property, and inheritance. Designed to support the country’s comprehensive social welfare programs, the French system is also rooted in the principle of solidarity and ensures a strong safety net for residents.
Understanding the basics:
- Sources of Taxation: Taxes are levied on income, property, wealth, consumption (VAT), corporations, and inheritance.
- Central Tax Authority: The main body is the Direction Générale des Finances Publiques (DGFiP).
- Tax Collection: Taxes are collected at national, regional, and occasionally municipal levels.
- Key Taxes: Income tax (Impôt sur le Revenu), social charges (prélèvements sociaux), property tax (taxe foncière and taxe d’habitation), capital gains tax (plus-value), and inheritance tax (droit de succession).
France also maintains dozens of double taxation agreements with other countries to prevent the same income from being taxed twice, which is vital for expats and non-French residents.
2. Fiscal Residency in France: Are You a French Tax Resident?
Understanding your residency status is the gateway to all French tax obligations. French tax residency does not always coincide with immigration/residence permit status, as it is assessed on fiscal rather than legal grounds. The determination of whether you are a French tax resident—résident fiscal—is based upon several key criteria defined in the Code Général des Impôts (CGI):
- Your habitual abode is in France (primary home is located there).
- Your principal professional activity or employment is in France.
- The center of your economic interests is in France (main investments, business, assets, or activities).
Generally, if you spend more than 183 days in France per calendar year, you are considered a French resident for tax purposes. This also applies if your spouse and children reside in France even if you travel extensively.
Dual Residency and Double Tax Treaties
If both France and another country claim you as a tax resident, the relevant double tax treaty will apply to resolve the conflict—typically aligning with where your permanent home (domicile permanent) is located, or where your vital economic interests are centered.
Tip: File a tax return even if you are unsure of your fiscal status. French tax authorities ultimately decide, but voluntary compliance can prevent complications.
3. Income Tax in France: Earning, Declaring, and Paying
Income tax is the centerpiece of France’s tax system, and understanding its structure is a must for residents and income-earning non-residents alike. French personal income tax is progressive, collected annually, and assessed on your worldwide income if you are a tax resident.
Taxable Income Categories
French law divides income into different classes:
- Salaries, wages, pensions, and annuities
- Business profits
- Self-employment/freelance income
- Property income (rent)
- Investment income (interest, dividends)
- Capital gains
The Progressive Tax Bands (2024 Based Rates)
| Taxable Income (per part) | Tax Rate |
|---|---|
| Up to €11,294 | 0% |
| €11,295 – €28,797 | 11% |
| €28,798 – €82,341 | 30% |
| €82,342 – €177,106 | 41% |
| Above €177,106 | 45% |
France uses a system called the "quotient familial"—adjusting the taxable income based on family circumstances. Households are split into "parts," with allowances made for a spouse/partner and each child, reducing the effective rate for families.
Filing a French Tax Return
Tax returns are annual, due in May–June online (impots.gouv.fr). New arrivals must request a tax number and sometimes file on paper the first year. France introduced the prélèvement à la source (withholding at source) in 2019, so tax is deducted monthly from salary or pensions, then reconciled with your return.
Common Deductions and Allowances
- 10% standard deduction or actual expenses for professional costs
- Childcare, education, and family support payments
- Charitable donations (with capped relief)
- Pension and retirement savings contributions
Non-Residents and French Tax
If you are not a French resident but have French-source income (rent, employment, pensions), you may be taxed at a flat minimum rate of 20% on such income, rising to higher bands after a threshold.
4. Social Charges and Social Security Contributions
France’s social charges are an additional layer of tax on most types of income, used to fund health, unemployment, family, and pension systems. These are separate from, and in some cases more substantial than, traditional income tax.
Main Social Contributions
- CSG (Contribution Sociale Généralisée): Main social security charge
- CRDS (Contribution au Remboursement de la Dette Sociale): Debt repayment levy
- PS (Prélèvements sociaux): General social charges on investment income and capital gains
The typical headline rates are:
- For employment and pension income: CSG (9.2%), CRDS (0.5%); for pensions, lower rates may apply.
- Investment income: total social charges rate of 17.2% (CSG 9.2%, CRDS 0.5%, solidarity levy 7.5%).
Who Pays Social Charges?
Residents pay social charges on worldwide income; non-residents face social charges only on French-sourced rental income and capital gains. EU/non-EU nationals in the French health system under another country’s scheme (e.g., S1 holders from the UK) may be partially exempt.
Impact on Expats and Retirees
Social charges can be a significant cost, especially on private pensions or rental income. Some bilateral agreements (such as for UK residents with S1 certificates after Brexit) allow an exemption from social charges on pensions, but rules change often, so check with the French authorities and double taxation agreements.
5. Property Taxes: Taxe d’Habitation and Taxe Foncière Explained
France levies local property taxes, which are important for both homeowners and renters. These help fund public services, infrastructure, and municipal operations.
Taxe d’Habitation
This is a residence tax paid by the occupier (owner or tenant) as of January 1st each year. However, from 2023, it has been almost completely phased out for main homes for most households, though second homes and high-value residences may still be subject to it.
Taxe Foncière
This is the property owners’ tax, paid by whoever owns the property as of January 1st annually, regardless of occupancy. It funds local commune and department budgets. Rates vary by region and property size/value, and have risen notably in some cities.
Both taxes are calculated based on the notional rental value of your home as assessed by the tax authorities, with annual adjustments.
Other Local Taxes
- TV licence fee (abolished as of 2022)
- Special waste collection or improvement levies for rural/holiday homes in certain areas
6. Capital Gains Tax: Selling Property and Assets
Selling assets such as real estate or shares in France may give rise to capital gains tax (impôt sur les plus-values).
Property Gains
- Main Home Exemption: The sale of your principal residence is exempt from capital gains tax.
- Second Homes and Investment Properties: Gains are taxed at 19%, plus social charges of 17.2%, totaling an effective 36.2% for EU/EEA residents. Extra surcharges apply for large gains above €50,000.
- Taper Relief: Long-term ownership reduces liability – after 5 years, increasing allowances reduce the taxable gain, with full exemption after 22 years for tax and 30 years for social charges.
Shares and Financial Assets
Gains are taxed at a standard flat rate of 30% (“prélèvement forfaitaire unique” or PFU), which includes both tax and social charges. Alternatively, under certain scenarios, you can opt for marginal income tax rate plus social charges with allowances for long-term holdings.
7. Insurance in France: Health, Property, Liability, and More
France is renowned for its exceptional, universal health coverage, but insurance obligations in the country go much further. Understanding mandatory and recommended insurance will help you comply with local law and protect your assets.
Healthcare Insurance
The French state health insurance system, Sécurité Sociale, provides coverage for medical care, hospital expenses, and prescriptions. For working residents:
- Employers automatically enroll staff in the system and deduct relevant contributions.
- Self-employed must register and contribute to the appropriate social security fund.
- Retirees—EU/UK pensioners under the S1 system—may receive coverage with little/no French contributions.
Healthcare is not fully free; on average, 70% of official tariffs are reimbursed. Most people top-up with private health insurance (mutuelle) for complementary coverage. This is strongly recommended and, in some cases (e.g., for employees), mandatory.
Property and Contents Insurance
- Home insurance (assurance habitation): Mandatory for tenants (including furnished rentals) and highly recommended for owners. Policies cover fire, damage, theft, and liability.
- Mortgage insurance: Required for those buying with a loan, covering death, disability, and sometimes unemployment.
Vehicle Insurance
All vehicles must be insured with at least third-party liability, even if only parked on your property. Failure to comply leads to severe penalties.
Personal Liability Insurance
The assurance responsabilité civile is strongly recommended for day-to-day life—this covers you and your family for accidental injury or damage to others, and is sometimes required by schools, sports clubs, or rental agencies.
Other Common Policies
- Travel insurance
- Life insurance (assurance vie)—also an effective estate planning tool
- Legal assistance coverage (protection juridique) for disputes
8. Inheritance Law and Inheritance Tax in France
One of the most critical aspects—often overlooked by newcomers—is the French system of succession law and inheritance taxation. France is unique in its approach, combining fixed inheritance rights for children (“forced heirship”) and a rigorous, progressive inheritance tax regime.
How French Inheritance Law Works
Forced Heirship: French law automatically reserves a significant portion of your estate for your children (and potentially surviving spouse), limiting testamentary freedom. For example:
- One child: child is entitled to half the estate
- Two children: two-thirds between them
- Three or more: three-quarters between them
The remainder (quotité disponible) can be freely bequeathed to others. Spouses have limited rights compared to many common law jurisdictions, though recent reforms have improved their situation.
Cross-Border Issues: The EU Succession Regulation
Since August 2015, under the EU Succession Regulation (“Brussels IV”), EU residents can opt for the law of their nationality for succession purposes, by stating so in their will. However, this typically does not affect inheritance tax, only distribution rules, and “public order” (forced heirship) rules may still apply.
Inheritance Tax Bands and Rates (2024)
| Beneficiary | Tax-free allowance | Tax Rate |
|---|---|---|
| Spouse/PACS partner | 100% exempt | 0% |
| Child or parent | €100,000 | 5% to 45% |
| Sibling | €15,932 | 35% to 45% |
| Other relatives | €7,967 | 55% |
| Unrelated persons | €1,594 | 60% |
The rates apply after the personal allowance and are progressive. Each child receives their allowance and is taxed separately on what they inherit.
Assets Subject to French Inheritance Tax
- For a French resident decedent: All worldwide assets are included.
- For a non-resident decedent: Only French-situated assets (property, shares in French companies, etc.) are included.
Gifts and Lifetime Giving
You can make tax-advantaged gifts to family members every 15 years, within the same allowances as above. Additional smaller exemptions exist for wedding gifts, certain savings plans, and grandparents giving to grandchildren.
Planning for International Families
Things can become very complex for international families, particularly where people have assets and heirs in France and abroad. Tax treaties can sometimes eliminate double taxation, but expert legal and tax advice is vital for cross-border estates.
9. Estate Planning in France: Tools and Strategies
Given the nuances of French inheritance law and tax, robust estate planning is crucial. Here are some of the main strategies used by residents and expats:
Employing “Assurance Vie” Contracts
The French assurance vie (life insurance) is an incredibly flexible savings and inheritance tool. Money invested in these contracts can be left to beneficiaries of your choosing (not necessarily heirs) and enjoys favorable inheritance tax treatment:
- For sums invested before age 70: Each beneficiary receives a €152,500 allowance, with just 20% tax up to €700,000, then 31.25%.
- For sums invested after age 70: Follows a different system, but significant relief can still apply.
This is a powerful way to benefit stepchildren or friends who would otherwise face 60% inheritance tax.
Cross-Border Wills
To override default French distribution rules (when allowed), EU residents can choose the law of their nationality in their will under the EU Succession Regulation. Even then, expert advice is essential as the forced heirship rules are occasionally still enforced for local assets (“public order” exception), and tax law remains governed by French rules.
Gifting Strategies
- Utilize allowances for gifts (“donations”), even to grandchildren, every 15 years.
- Complete paperwork with a notary to ensure the gift is legally recognized and reported.
- Consider wedding and special occasion gift exemptions.
Usufruct and Bare Ownership Arrangements
French law allows for dividing property rights into usufruct (right to use and enjoy property) and nue-propriété (bare ownership). This technique, known as “démembrement,” can pass wealth to children at lower tax rates while enabling a spouse to keep living in the property.
10. Practical Tips, Case Studies, and Frequently Asked Questions
Practical Tips for New Residents
- Register with French tax authorities promptly, even if you do not owe tax, to avoid penalties.
- Set up automatic payments and track your tax and insurance deadlines — non-payment can lead to surcharges and enforcement action.
- Keep thorough records of all financial transactions, gifts, and inheritances, as these may be reviewed years later.
- Review your insurance policies annually to ensure you have adequate health, property, and liability cover.
- If you own property or investments in multiple countries, consult a bilingual tax and estate lawyer (“notaire”) to coordinate your succession and minimize double taxation.
Case Studies: Real-Life Examples
Case Study 1: Retired British Couple in Dordogne
Mary and John, retired UK nationals, move to France. Mary receives a UK state and private pension, John receives military and private pensions. They have three children, one living in the UK and two in France. They buy a house in the Dordogne and register as French residents.
- Their UK pensions are generally taxable in France, but with the S1 form, they are exempt from French social charges on pensions (as per the Brexit Withdrawal Agreement).
- Their house is subject to taxe foncière but, as a primary residence, not taxe d’habitation.
- To avoid future inheritance disputes, they make French wills referencing UK law (EU Succession Regulation) and take out assurance vie contracts for each child.
Case Study 2: Young American Tech Worker on Assignment
Sarah, a US citizen, is hired by a Paris startup for two years. She rents an apartment and is paid via a French payroll. She keeps her US home and investments.
- Sarah becomes French tax resident due to her length of stay and income source. She declares worldwide income on her French tax return, but the France–US tax treaty avoids double taxation.
- She’s enrolled in French social security, and her employer provides a mandatory private health top-up.
- Sarah ensures she has both liability and renter’s insurance (assurance habitation).
Case Study 3: French Family with Holiday Home in Provence
The Martins, French and US dual citizens living in California, own a holiday home in Provence. They rent it out seasonally.
- As non-residents, they pay income tax (minimum 20%) and social charges on French rental income.
- On death, French assets are subject to French inheritance tax, even for US residents, though the US–France tax treaty may reduce double taxation.
- They revisit their estate plan with a French notary to optimize taxes and take advantage of gifting allowances during their lifetime.
Frequently Asked Questions
Q1: When do I become liable for French taxes?
If you live in France more than 183 days in a calendar year, or if France is your main base of life, you are considered a French tax resident and must declare worldwide income.
Q2: Am I liable for French inheritance tax if I'm not a French citizen?
Citizenship is irrelevant; French law applies based on residency and the location of assets. French residents pay inheritance tax on assets worldwide; non-residents pay only on French assets.
Q3: Can I avoid French social charges?
You may be partially or wholly exempt if you hold an S1 health certificate (EU retirees) or via certain bilateral agreements, but most residents must pay social charges.
Q4: How can I pass my estate to my spouse tax-free?
After legal reforms, transfers to a legal spouse or civil partner (PACS) are fully exempt from French inheritance tax.
Q5: Do I need a French will?
It is strongly recommended, particularly for internationals and anyone wishing to direct their succession by the law of their nationality under EU rules. French notaries are the best point of contact.
Q6: What happens if I fail to declare income or assets?
Penalties for missed or inaccurate tax declarations are severe—ranging from surcharges to criminal prosecution in cases of fraud. Voluntary disclosures are treated more favorably than detected errors.
Conclusion: Making Your Life in France a Success
France offers an unrivaled quality of life — world-class food, culture, healthcare, and public services. However, the complexity of its tax, insurance, and inheritance systems can trip up even the most experienced expatriates and international families. Fortunately, with proactive planning, professional advice, and ongoing compliance, you can minimize your liabilities and protect your wealth, ensuring your time in France is enjoyable, secure, and hassle-free. From understanding the nuances of income tax and social charges, to making the best use of assurance vie and inheritance planning, the tools are there — it’s up to you to use them wisely.
Take the time to seek expert guidance, review your personal position annually, and stay abreast of changes in law, to make your French adventure as smooth and rewarding as possible. Bienvenue en France!