How income tax is calculated in France

In reviewing the finance law for 2020, which lowers income tax, it is useful to look at the process of calculating income tax in different situations.

Income tax is calculated based on the amount of gross taxable income, which is obtained in stages:

– Divide the amount of gross taxable income by the number of shares that are allocated according to the number of people in your tax household.

– Then apply the progressive tax rate to this result.

– Multiply the result obtained by the number of shares of the family unit to obtain the amount of the tax due

Divide the net taxable income by your number of family unit shares

The number of family unit shares is calculated according to the number of people in the household.

– If you are single, divorced or widowed, you will be taxed on the basis of one family unit share.

– If you are married or in a partnership, you are entitled to 2 family unit shares.

If you have dependents, you are entitled to additional family unit shares. The number of additional shares is determined according to your situation.

Example 1: A single person with a net taxable income of €38,000

This single person has access to one family unit share. Therefore, he or she must carry out the calculation €38,000/1 = €38,000.

Example 2: A married couple or a couple in a civil partnership with two children, with a net taxable income of €55,950

The couple has 3 shares (2 shares for the couple and half a share for each minor), so the net taxable income of €60,000 is divided into 3 = €20,000.

Apply the progressive tax scale to the result obtained

Depending on the amount earned, your income is divided into one or more brackets. Each income bracket is taxed based on a different percentage.

Bracket	Income amount	Percentage tax
Bracket 1	0€-10064€	0%
Bracket 2	10064€-25659€	11%
Bracket 3	25659€ -73369€	30%
Bracket 4	73369€ -157369€	41%
Bracket 5	Above 157 806€	45%

Example 1: A married couple or a couple in a civil partnership with two children, with a net taxable income of 55 950 €.

The scale is applied to the result obtained in stage 1: €18,650.

– Income bracket up to €10,064 taxed at 0% = 0

– Income bracket 10 064 € to 25 659 € taxed at 11%: i.e. 8 586 € (obtained by calculating 18 650 – 10 064) x 11% = 944.46 €.

The average marginal tax rate for this family is 11%, but not all their income is taxed at 11%.

The result is therefore 0 + 944.46 = €944.46.

Determining the amount of income tax: Multiply the result obtained by the number of family unit shares.

When the progressive tax scale has been applied to the result obtained in Step 1, then the amount in Step 2 must be multiplied by the number of family unit shares to obtain the amount of income tax due.

Example 1: A single person with a net taxable income of €38,000

The single person has only one family share unit, so the result of step 2 is multiplied by 1 (number of units):

Summary of step 2 (application of the scale: ((25659-10064)*0.11)+(38000-25659)*0.3) =5417.75

This single person will thus have to pay an income tax of 5417.75 € rounded up to 5418 €.