Income tax : everything you need to know about it

The tax return is undoubtedly one of the most dreaded administrative procedures by taxpayers. With the introduction of the withholding tax, income tax has had a facelift in France : online declaration, but above all tacit declaration, has enabled millions of French people to avoid this task. How does income tax work ? The answer in this article.

What is income tax ?

Income tax (IR) relates to income, capital gains and realized profits. You can visit the site for special info. For a large majority of French taxpayers, income tax is made up of personal income tax (IRPP), the general social contribution (CSG) and the contribution for the repayment of social debt ( CRDS), the latter two forming the social levies.

Contrary to what many think, it is a relatively recent tax. Indeed, it was only in 1914 that it was adopted to support the country’s effort during the First World War. Although it primarily taxes households, the IRPP may also be taxable on certain companies, such as civil companies or partnerships. It is thus opposed to local taxes, the revenue of which goes to local authorities, unlike income tax which is an integral part of the State budget.

How income tax works in France

In France, income tax is deducted in two stages : the payment of social and employer charges first, which are directly deducted from your salary (this is the famous difference between a « gross » and « net » salary « ). All of these contributions represent between 25% and 42% of gross salary (or 54% of net salary). Then comes the declaration of your taxable income itself. Before the year 2019, it was through the tax return that each taxpayer indicated his income received the previous year. You then had to pay your taxes to the state manually after receiving your tax notice.

But, since January 1, 2019, income tax is deducted at source, which means that income tax is automatically deducted by the tax authorities from your salaries, pensions, etc. This greatly simplifies the calculation, but what about the declaration ? The latter is still relevant, serving more as a verification than a real declaration, given the fact that the State already has all the information : amount of salaries and pensions, family situation, etc.