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The French government have released the proposed income tax rates and bands that will apply next year on 2021 income.

Although income tax rates remain unchanged next year, the income bands on which the rates apply have been increased by 1.4% from those of the current year, in line with the retail price index. Last year the increase was only 0.2%. The proposed bands and rates are as follows:

 

 

Tax Band

 

Rate
Up to €10,225 0 %
€10,225 to €26,070 11 %
€26,070 to €74,545 30 %
€74,545 to €160,366 41 %
From €160,366 45 %

 

As income is taxed on a fractional, progressive basis, it means, for instance, that a someone with a net taxable income of €35,000 would pay no tax on the first €10,225, then at 11% for the income between €10,225 to €26,070 and at a rate of 30% on income between €26,070 and €35,000.

For a couple, their total income is divided by two. Thus, using the above example, if the income of a couple were €35,000, they would each be taxed on €17,500, when the first €10,225 of each spouse would be tax free and the sum between €10,225 and €17,500 would be taxed at the rate of 11%. The resulting figure is then multiplied by 2 to give the total tax payable by the household.

The same principle is applied to a family with children, although a child is only a half ‘part’, meaning that the total income would be divided by 2.5. In a family of four the income would be divided by 3, although the tax benefit from dependants cannot exceed €1,592 (2021 income) per child, but higher for widows and divorcees.

There are also a range of other tax deductions and tax credits that apply to create a net taxable figure, which in practice means that a single person with a net income of circa €15,000 would pay no income tax, whilst for a married couple it would be circa €30,000.

 

This communication is based on our understanding of current taxation legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.