Income tax: a progressive scale
French income tax (impôt sur le revenu) is progressive: the rate rises in bands as income increases, and it applies per part of the household (France uses a family-quotient system). As an indication, the 2026 bands are roughly:
- 0% up to about €11,497
- 11% from about €11,497 to €29,315
- 30% from about €29,315 to €83,823
- 41% from about €83,823 to €180,294
- 45% above about €180,294
These thresholds are revised each year in the Finance Act, so treat them as indicative and check the current figures on the official government site: impots.gouv.fr.
Income tax and social contributions are two different things
This is one of the most common sources of confusion for newcomers. In France, income tax (impôt) and social contributions (prélèvements sociaux, mainly CSG and CRDS) are two separate levies. They are calculated differently, appear separately, and are often discussed as if only one existed.
But make no mistake: on most income and investment gains, you pay both. When you read that an investment is "tax-free," it usually means free of income tax — social contributions may still apply. Always reason in two layers: what is the income-tax treatment, and what is the social-contributions treatment?
Two ways to tax financial assets: scale or flat tax
Gains, dividends and interest from financial assets can be taxed in one of two ways in France:
The progressive income-tax scale — the gains are added to your other income and taxed at your marginal rate (the bands above), plus social contributions.
The flat tax (PFU, prélèvement forfaitaire unique) — a single flat rate of 30%, made up of 12.8% income tax and 17.2% social contributions.
In most cases you can choose the option that is more favourable to you. For higher earners, the flat tax is often better; for those in a low income-tax band, the progressive scale can be cheaper. This choice is one of the levers a financial adviser helps you use.
The real French difficulty: the account type matters
Here is the point that surprises most people arriving in France: the tax you pay on the same investment can differ enormously depending on the account type — the wrapper — it sits in. Choosing the right wrapper is often as important as choosing the assets themselves. The main ones are:
CTO (compte-titres ordinaire) — the ordinary stock account. The most flexible: it can hold almost any security, worldwide. But it offers no tax advantage — gains are taxed each time you realise them, typically under the flat tax.
PEA (plan d'épargne en actions) — the tax-advantaged investing account. Limited to European shares (though PEA-eligible ETFs give global exposure). After five years, gains are free of income tax; only the 18.6% social contributions remain due.
PER (plan d'épargne retraite) — the retirement account. Contributions are deductible from taxable income, within limits, in exchange for locking the money until retirement. Especially useful for high earners; taxed on exit.
PEE (plan d'épargne entreprise) — the corporate savings account. An employer scheme, often with a company top-up. Gains escape income tax after a five-year lock-in; social contributions still apply.
Assurance-vie — not "life insurance". Despite its name, assurance-vie is not life insurance in the British or American sense. It is a highly flexible, tax-efficient wrapper to invest and, crucially, to transmit your assets to chosen beneficiaries — who can be anyone you designate, not only your legal heirs. It is one of the cornerstones of French wealth planning.
Independent advice, no commissions
Retiring in France means navigating a tax system built around wrappers, not just assets. As a fee-only adviser working in English, paro conseil helps you place your savings in the right structures for your situation. Get in touch to discuss it.
In summary
Retiring in France means understanding a tax system with two separate layers — income tax and social contributions, both of which you pay. Financial gains can be taxed at the progressive scale or the 30% flat tax, and you can usually pick the better option. But the decisive factor is the account type: CTO, PEA, PER, PEE and assurance-vie each carry their own treatment, and the right wrapper can transform the tax outcome of the same investment. Getting this structure right early is one of the most valuable steps you can take.
Frequently asked questions
Do I pay both income tax and social contributions in France?
Yes. Income tax (impôt) and social contributions (prélèvements sociaux) are separate levies, but on most income and investment gains you pay both. "Tax-free" usually means free of income tax only — social contributions may still apply.
What is the flat tax (PFU)?
A single flat rate of 30% on financial gains, dividends and interest — made up of 12.8% income tax and 17.2% social contributions. You can generally choose between the flat tax and the progressive income-tax scale, whichever is more favourable.
Why does the account type matter so much?
Because French tax depends heavily on the wrapper your assets sit in. The same investment can be taxed very differently in a CTO, a PEA, a PER, a PEE or an assurance-vie. Choosing the right wrapper is as important as choosing the assets.
Is assurance-vie the same as life insurance?
No. Despite the name, French assurance-vie is not life insurance. It is a flexible, tax-efficient way to invest and to transmit your assets to chosen beneficiaries — who can be anyone you designate. It is a central tool in French wealth planning.