Over the years the month of May has become an important time regarding French income tax. For example, by May 15th you must pay the second installment of your annual income tax. Remember there are three payment dates: February 15th, May 15th, and September 15th. The system is set up so that on each of these dates, people pay a portion of the full amount of taxes due, normally in three equal installments. I would like, however, to highlight one important comment here.

The first two payments are equal to one-third of the taxes you owed the previous year (2007), since the tax collection agency does not yet know your income for the current year (2008). The Trésor Public handles the entire process. This division of the French administration only collects income tax, it does not calculate it. Another system has now become popular in which you automatically make monthly payments from your bank account to the tax office and avoid all problems, until, of course, a dispute occurs!

The second May rendez-vous with taxes is the submission of your income declaration to the tax office. The official information I have received is that the forms will be available at the beginning of May and must be filed by May 31st. French residents with foreign income will need to fill out a minimum of these three forms: 2042, 2042C and 2047. The forms will be available on the government Website, http://www.impots.gouv.fr in a few days.

Also, since it is tax season, I would like to remind readers of a few fiscal issues regarding residency and home rental in France. The definition of a French fiscal resident is addressed hereafter in the second Q/A. If a person or a family is considered to be a French fiscal resident, then they must declare their total income to the French administration. Note that declaring both as an American citizen and a French fiscal resident does not mean you are being taxed twice. By strictly applying the tax treaty between both countries, the primary fiscal tax collector is the country of residence – in this case, France. That said, this treaty also defines some exceptions.

The other tax issue is that renting out an apartment or house in France always generates French income that is taxable in France. This is true even if the owner and tenant are American residents, and the payment is made in dollars in the U.S. Naturally, the question is: "How would the French tax inspector know that the place is being rented?" There are telltale signs, such as the taxe d’habitation that applies to a secondary residence, the EDF electricity meter that is in the owner’s name, and the amount of electricity consumed throughout the year – not to mention the gardien(ne) who knows the situation within a couple of months after the rental arrangement has started. The French tax on this income follows almost the same guidelines as in the U.S., that is, only the profit is taxed (rental income minus expenses related to the property). The one exception is when you qualify for the special ‘micro foncier’ status.

The good news in all of this is that French tax inspectors, as part of their job description, are also knowledgeable tax advisors for the public. Interestingly enough, these civil servants enjoy this part of their job and are often polite and helpful. They will show you how to minimize your tax bill while explaining the reasons, which is often the most important part of their service. This, of course, requires you to master French and become accustomed to dealing with the French administration. Though these inspectors can give technical answers to specific questions, they are not good at handling open-ended questions.

Jean Taquet holds a masters degree in law from the Sorbonne University and the French BTS accounting degree. He served as a jurist officer in the French Army in1985. He has been managing the refugee ministry of the American church since 1993, and has written the Question and Answer column in the Paris Free Voice. This column has continued and a book has been made with it. The Insider Guide to Practical Answers for Living in France. As an associate member of the Delaware Bar association since 1987, he had an article published in the February 1988 issue of the Delaware lawyer and sat as a guest member on the wills and trusts committee.

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