The French government published its 2023 budget on 26 September-2022. This now has to pass through the parliamentary process before being finalised and approved at the end of the year.
This budget does not carry any significant reform. Income tax bands will increase – thereby reducing tax liabilities – and there are no tax rises.
Income tax
The income tax bands will increase by 5.4%, to match inflation.
2023 Income tax rate bands for 2022 Income
| Net Income | Tax Rate | Tax on Band | Cumulative Tax |
| Up to €10,777 | Nil | ||
| €10,778 to €27,748 | 11% | €1,866.70 | €1,866.70 |
| €27,749 to €78,570 | 30% | €15,246.30 | €17,113.00 |
| €78,571 to €168,994 | 41% | €37,073.80 | €54,186.80 |
| Above €168,994 | 45% |
This means that employees who received a pay rise because of inflation are much less likely to be hit by a higher tax rate. Those whose income has not changed will now benefit by paying less tax on it.
These new tax brackets apply to your 2022 income-as declared on your tax return that you submit in spring 2023.
Social charges
The budget maintains social charges at the same rates as 2022:
- Employment Income: 9.7%
- Pension Income: 9.1%
- Investment Income: 17.2%
The special lower rates also remain in place:
- Pensions
Social charges on pensions are reduced to 7.4% for those whose taxable income is less than approximately €2,000 a month (€3,000 for a couple). If you have Form S1, and/or are not subject to the French health care system, you do not need to pay any social charges your pension income, regardless of the amount you receive.
- Investment income
If you are covered under the health care system of another EU/EEA country, or if you have Form S1, social charges are reduced from 17.2% to 7.5% for investment and property income. Earlier this year the French government confirmed this continues to apply to UK residents and to UK nationals living in France.
Taxe d’habitation and TV licence reform
The taxe d’habitation reform which began a few years ago finishes in 2023 for the remaining 20% of households who were still paying it.
This budget also confirms the removal of the TV licence implemented in the August 2022 revised budget.
Succession taxes reform…nothing has changed as yet
During his presidential campaign, Emmanuel Macron promised to reform and diminish succession taxes by increasing the tax-free deduction for inheritances between parents and children from €100,000 to €150,000, and by lowering the taxes for other relatives such as stepchildren.
However, the government does not support this reform at the present time. But it could still be voted on by Parliament further to a MP amendment, but this is uncertain.
Real estate wealth tax
The current threshold of €1,300,000 will stay in place for 2023 and no changes are proposed to the scale rates of wealth tax.
Assurance-vie
The budget does not include any changes to the taxation of Assurance-vie policies.
These savings and investment ‘wrappers’ remain a very attractive tool for both a tax and succession tax planning.
The finance bill will now be debated by the French parliament and needs to be approved by the end of the year, so there may be changes.
This communication is for informational purposes only based on our understanding of current 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.