FRENCH TAX UPDATE – January 2020

Please find below the major tax provisions in the new Tax Bill and how they may impact you. They are based on the Loi de finances 2020 now passed into law by both Houses and verified as being compliant with the Constitution.

2019 INCOME TAXE SCALE RATES (Barème progressif)

The 2019 income tax bands’ limits are increased by 1% compared to 2018, in line with prices (price index 2019 excluding tobacco).

* The family quotient is the number of members of the household. This system allows the total taxable income of the household to be shared among the members.

The 20% tax rebate for ‘classes moyennes’ applies if RFR (Revenu Fiscal de Reference) ≤ 19,176 for a single person (38,352 for a couple + 3,836 for additional ½ parts). A lower tax rebate applies if 17,176 < RFR < 21,249 for a single person (21,249 < RFR < 42,498 for a couple + 3,836 for additional ½ parts).

2020 INCOME TAX SCALE RATES (Barème progressif)

A tax cut is granted for 2020 income tax. The second bracket rate is reduced from 14% to 11% representing a €350 savings for tax payers in that band. However, the resulting gain will be capped at €125 for households belonging to the 30% band and will be neutralized for those belonging to the 41% and 45% bands.

On the other hand, the previous 20% tax rebate in favor of ‘classes moyennes’ is removed for taxation of 2020 income.

2020 PAY AS YOU GO (Prélèvement à la source)

The 2020 withholding tax takes into account the tax cut resulting from the reevaluation of the income tax bands through reduced contribution rate with effect from January 2020.

Furthermore, some amendments have been made to the French income withholding tax to simplify tax administration.

In order to take into account the variation of household income and expenses, taxpayers have the possibility to modify and adjust their levy amount. Up to now, taxpayers could increase their levy amount without any prior condition – but a decrease was only possible if there was a 10% gap and €200 between the modified levy amount and the amount that should have been withheld.

The 2020 financial law has removed the minimum gap of €200 which penalized small tax payers. It is therefore now possible to lower the levy amount as long as a 10% gap exists between the modified levy amount based on estimated income and the levy amount that should have been withheld.

If the total paid during a year finally represents less than 90% of the assessed tax, please note that you will be charged a 10% penalty on the underpayment. Higher penalties apply if your payments are less than 70% of the assessed tax.

An advance tax credit is paid automatically to tax payers on January 15 each year, based on 60% of tax credits and reductions obtained on their last tax assessment for domestic employment, childcare costs, charitable donations, trade union fees, accommodation expenses in an EHPAD retirement home or eligible rental investments. This advance may have to be reimbursed, totally or partially, if the final tax credit is inferior. Tax payers can apply for a reduction of this advance until December 1st, if they know they are not eligible and will have to reimburse this advance tax credit.


The reduction and elimination of Taxe d’habitation from 2018 currently concerns only the main residence of tax payers with RFR N-1 <28,448 for 1 part. They will benefit from total exemption in 2020. Other tax payers remain subject to Taxe d’habitation in 2020 but they will benefit from 30% reduction in 2021, 65% in 2022 and total exemption in 2023 for their main residence only. The Taxe d’habitation will continue to apply to Secondary residence and taxation basis are being reviewed.


The CITE tax credit for energy saving improvement to your main residence will continue to apply for expenses paid in 2020. However, it is now subject to different conditions and new eligibility rules.

For Tax payers with modest income, CITE is replaced by an allowance called “prime de transition énergétique” paid by the Agence nationale de l’habitat (Anah) immediately after the work achievements for the expenses paid as of January 1st, 2020.

CITE is no longer available for those with RFR >27,706 € for 1 part, except for the following expenses:

  • Electric vehicle charging system
  • Thermal insulation materials of opaque surfaces