French source income of non-resident subject to withholding taxWithholding tax, Withholding tax Tuesday, August 17th, 2010
In principle, persons not domiciled in France must file an annual return reporting all their income if they have income from French sources or one or more homes in France. The rules for income received by persons domiciled in France are the same in principle for income received by persons not domiciled in France.
However, specific arrangements exist.
Withholding tax is applied to some income from French sources received by persons not domiciled in France. In some cases the withholding may discharge the income tax liability, meaning that progressive rates of tax are not applied to the income in question.
Some income is expressly exempted when received by non-residents.
Income subject to withholding tax:
Profits from non-commercial activities carried on in France by persons not domiciled there are taxable under the same rules as for profits of the same kind received by persons domiciled in France.
However, withholding tax at 33⅓% is levied on non-commercial or similar income paid to persons (or companies) that do not have a permanent business establishment in France.
Withholding tax at the same rate is also generally levied on remuneration paid for services of any kind actually provided or used in France.
However, a 15% rate applies to sums, including salaries, paid for artistic or sporting performances in France.
The amount of the withholding relating to certain non-salaried income is credited against the income tax payable by the individual (or company) on income from French sources. The withholding is not refundable.
Wages, salaries, pensions and annuities
Wages, salaries, pensions and annuities paid to persons not domiciled in France are liable to withholding tax in three bands, the limits of which are updated annually:
• no withholding tax is levied if the annual amount is less than €13,977.
• withholding tax is payable at 12% on income between €13,977 and €40,553;
• the rate is 20% for income in excess of €40,553.
The withholding can normally be set off against the final amount of tax payable.
That being said, the withholding on wages, salaries, pensions and annuities discharges income tax for the taxable portion, taxed at 12%, that does not exceed €40,553 for 2009. This arrangement is reserved for French nationals who do not have their tax domicile in France and for nationals of countries that have concluded a treaty with France containing a non-discrimination clause. The portion is not included in the income tax calculation and the corresponding withholding cannot be set off against it.
In contrast, the taxable portion of the income in question which exceeds the above-mentioned limit is included in the income tax calculation and the corresponding part of the withholding can be set off against the amount of tax.
However, these provisions do not mean that taxpayers must declare only the excess portion. They must report all wages, salaries, pensions and annuities from French sources available to them during the year of taxation together with the total amount of withholding tax levied on such income on their annual tax return.
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