EXPLAINED: The French tax rules for remote workers

The increasingly digital world means that it is now common for people to live in France but to work remotely for companies back home in the UK, USA, Australia etc. But while setting up your laptop is easy, the tax and residency status for remote workers is more complicated.

EXPLAINED: The French tax rules for remote workers
Photo: Olivier Morin/AFP

It’s a growing trend and has definitely been accelerated by the pandemic, but for more and more people work means sitting in front of a screen working for a company in another country.

For many foreigners in France it’s the perfect solution, allowing them to live in France and work, even if their French is not quite at the level of being able to work for a French company.

But if you’re going down this road then there are some things to think about.

The first is your residency status and where you declare you work, and we’ve tackled that HERE with immigration law expert Fiona Mougenot.

But there’s also the issue of tax and where you declare your earnings, and for that we have spoken to bilingual accountant and expert in expat finances, Faten Amamou.

A note of caution – this is complicated stuff. We’ve provided an overview of the rules and things to be aware of, but if you are at all uncertain, please get professional advice from an accountant who understands the French tax system.

READ ALSO How to find professional help with French taxes

Digital Nomads

You might have heard the term ‘digital nomad’ – indeed some countries even have special visas for them – but that’s not really what we’re talking about, since digital nomads usually move around and only work in one place for a couple of months.

What we’re referring to here are people who live in France, have the appropriate residency permits (carte de séjour or visa for non-EU citizens) but whose work is done online for a company or companies in another country – for example translators, teachers who do online tutoring or proofreaders.

Legal and tax residency

First you need to work out if you are a résident fiscal (tax resident) in France, but if you live here full time then chances are that you are.

Faten said: “We define tax residents as someone who either has all their work or economic activity in France or someone who has all of their family here or full-time residency here. If you fall into any one of those three categories, then you need to make the annual tax declaration.”

All full-time residents in France must fill in the declaration – even if all their income comes from outside France – but for remote workers another question arises; should you declare your earnings here in France or in the country where your employer is based?

Faten said: “There are some exceptions, but in general you should be declaring in France. You are based here and are providing a service here, so you count as a French service provider.”

Double taxation

Depending on your circumstances and nationality, you may end up filing tax returns in both France and your home country – but this doesn’t mean that you have to pay tax twice on the same income, since France has double taxation agreements to ensure that this doesn’t happen.

As a general rule of thumb, when you file your French tax return you must tell the French taxman about all your global income – including work done for overseas companies and income received in other countries such as a pension, income from shares and income from rented properties.

Where you pay the tax, though, varies.

Faten said: “We call certain types of income passive income – this would include for example money from a property in another country that you rent out, or income from share dividends outside France. You don’t need to be in the country or do anything for this income, and in general you would pay that in the country where it is earned.”

“But income that you earn by working in France would normally be counted as French income.”

Depending on your home country’s tax laws, you may also need to make a declaration there too, especially if you are earning money in that country.

Taxes and social charges

In France there are two sets of deductions from income – income tax (impôt sur le revenu) and social charges (charge). Income tax is paid only by the employee and is generally much lower than social charges, which are paid by both the employee and the employer.

Social charges cover things like social contributions for health and benefits, but also include the compulsory contributions to your French pension and contributions to the Pôle emploi (unemployment office) which dictate the level of benefits you can expect to receive should you become unemployed.

Employed or self-employed

There’s also the question of your employment status – whether you are an employee of the overseas company (or companies) that you work for or whether you are freelance.

Freelance – if you are self-employed or freelance then you have to register yourself as such in France.

The most common statuses are micro-entrepreneur (for people earning under a certain amount), entrepreneur or setting up as a limited company. You need to register yourself with URSSAF and will get a SIRET number which enables you to bill companies for the work you have done for them.

READ ALSO How to register as self-employed in France

Being correctly registered also means that you can benefit from things like healthcare, start contributing to your French pension and claim grants or economic help targeted at the self-employed.

If you’re saying that you’re freelance, though, you need to be truly freelance.

Faten said: “The French state is on the lookout for fake employment contracts and you can be subject to an audit if they suspect this. 

“If you are only working for one company and they are dictating your working hours then you’re not really freelance.” 

“We advise that people have at least two or three different clients that they work for. Also, employees should up their rate if they register themselves as freelance – they are saving the company a lot of money by doing that.

“The French state receives less in social contributions when workers are freelance, so they are motivated to look out for this and they might also look at things like whether you have a company email address.

“If you’re found to be falsely declaring as freelance they will chase up contributions, but if the employer is not in France then the worker might end up having to pay all of this.”

Employee – it is possible to be a salaried employee of a company based abroad, and this is quite common for people who were originally based in the UK/USA etc working for a company and then decide to move.

This does, however, come with responsibilities for the company.

Faten said: “First they must declare themselves as a French employer and get a SIRET number. They don’t  actually have to set up a French subsidiary, but they do have to register themselves as an employer within the French system.

“They must also pay French social contributions for their employee, which are relatively high in France compared to many other countries. This is why many are tempted to go down the freelance route, but as outlined above you need to make sure you are genuinely freelance.

“The employment contract also needs to be compatible with French law, which provides protection for the employee.”

Limited companies

Some people may already have a company set up in their home country (eg the UK), or may set one up so that clients can pay a UK company rather than a foreign company.

Faten says: “This is legal to do, but you then need to be billing that company for your time and this needs to be approached properly, the same way as any other contract between two companies.

“Just because you own both companies doesn’t mean that you can skip the formalities, and be careful with things like charging at an above-market rate. This could lead to a tax audit.”

Home country

Finally, you need to check the tax requirements for your home country. If that country has a double taxation agreement with France then you won’t end up paying income tax on your French income, but you may be required to pay other charges, for example VAT, if you are providing a service in that country.

Faten Amamou is a Chartered Accountant in France at ESCEC International and member of the Institute of chartered accountants in France (ordre des experts-comptables). Fluent in English, French and Arabic she provides accounting services to both individuals and businesses, and specialises in helping foreign entrepreneurs set up their business and careers in France. Find out more here.

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Americans in France: What you need to know about your pension

The food. The weather. The wine. The lifestyle. France has plenty to offer retirees - but ensuring you make the most of your hard-earned pension will make your new life in l’hexagone even better.

Americans in France: What you need to know about your pension

Lots of Americans retire to France, and there are generous bilateral agreements in place that make matters relatively straightforward.

First things first; US citizens can bring any type of US-based pension to France – although you’ll have to inform the US tax authorities that you’ll be paying French income tax on it.

You can move either before or after your pension starts to pay out and it doesn’t affect your payments.

US citizens coming to retire in France still have to file a US tax return every year, as well as a French one. Dual taxation agreements mean that you won’t pay tax twice on the same income, but you do have to complete two sets of tax declarations.

You can only forego US income tax responsibilities if you renounce your US citizenship – a process that is lengthy and expensive.

Tom Goold, founder of international financial advisers Valiant Wealth, said: “Generally, France is an attractive retirement destination for US expats with one of the best double taxation agreements and favourable views on US retirement accounts such as IRA 401(k)s and the like.

“If you pay state income tax in the US then this is eliminated in France. One negative could the higher estate taxes in France but there are certain structures that help navigate this issue.

“If this is a concern then you should work with an appropriately qualified advisor who has US experience and regulation.”

For further information, log on to the IRS website for advice and information on exclusions and deductions.

Tax matters

You should inform tax authorities in the USA that you’re moving to France. 

Pensioners are treated favourably here, with a 10 percent reduction factored in on income up to €36,600. You also pay tax as a household so you probably end up paying less tax than you might elsewhere.

If you own property in France expect to pay property taxes in addition to taxes on your income.

Once you have been living in France for three months you are entitled to register within the health system and if you become ill, incapacitated or need extra care as you get older, France has a generous social security system

Americans in France: What’s the deal with health insurance?

Currency matters

Be aware that currency fluctuations will mean that the amount that finally makes it into your bank account will change from month to month.

Other challenges

There’s a piece of US legislation known as FATCA that means all Americans in France, not just pensioners, may struggle to open a bank account – here’s some tips on how to get round this.

READ ALSO What are the biggest challenges for Americans in France?

In all cases, it is best to obtain independent advice that’s appropriate to your personal situation, from a financial expert.