FAQ - Canada - Tax rates
1 - What is the rule of the "taux effectif" ?
The French income tax is usually calculated by application of a progressive rate. For taxpayers domiciled or residing in France, this rate can be applied by taking into account, not only the income exclusively taxable in France, but also the exempt income or the income exclusively taxable in another country (articles 170, 197 C of the French Tax Code). This rule known as of the "taux effectif" applies for example:
- to the foreign employees of international organizations, who are not taxed in France on their compensation from the international organization; or
- to the people receiving a pension from the Canadian social security.
To avoid double taxation, a tax credit (attributable to the Canadian source income, which is not taxable in France) will be granted on the amount of the French taxes.
Such income, calculated with form 2047, must be reported on the 2042 income tax return (point 8, line TK ).
The tax credit has to be reported in paragraph 8, line TA of the 2042 income tax return.
2 - I receive a low income from France. However, I am taxed at a 20 % rate. Why?
The French income tax of individuals who are not domiciled in France and are taxed in France on their sole French source income, is computed by application of the progressive rate and the "quotient familial" (number of people in the family).
However, this tax cannot be lower than 20 % of the net income. This 20 % minimum rate can be lowered if the individuals can justify that if their worldwide income would be taxable in France as a French resident, the average rate would be lower than 20 %.
To benefit from this provision, you have to file your French income tax return in due time and enclose a request of decrease of the 20 % rate pursuant to article 197A. You have to send along with the return, a certified copy of your Canadian tax return.