France is one of the few countries where employers do not
withhold the employee's personal income tax from their payslip.
The employee is responsible for filing and paying their own income
tax, one year in arrears. This delay routinely causes problems in
the case of a drop in income the next year, and where the employee
did not save enough to be able to pay his or her income tax of the
The French government has decided to implement electronic filing
systems in order to increase the accuracy and timeliness of income
tax collection. The following reform will be discussed in
Parliament by the end of 2016.
Effective 1 January 2018, French employers will
be required to withhold personal income tax from their
employees' payslip each month.
The French Tax Administration will calculate an employee's
individual tax rate based on the past year's annual declaration
of income. The calculation will take the employee's entire
household income into consideration. Employers will be
notified of an employee's individual rate via a
government-administered secure portal. The employer will use this
tax rate to withhold personal income tax from the payslip, and pay
the income tax to the tax administration on behalf of the
This change will result in:
a lower net salary for the employee at the end of each
an immediate and equalised payment of the income tax throughout
the year, instead of a delayed payment which often disrupts the
employee's cash flow
an immediate collection of the tax for the French
a considerable amount of additional work for the employer's
The controversial reform has naturally raised fears on both the
employer and employee sides.
Employees fear the disclosure of their personal income tax rate
to their employer could allow the employer to gain an inappropriate
amount of insight into the employee's financial situation.
Employees fear they will have to pay income tax twice in 2018
(once on their 2017 income, and once on their monthly 2018
Employers fear that this new requirement could be an additional
In order to address these fears, the government has decided to
take a conservative approach.
The employee will have control over the tax rate disclosed to
their employer; a default "neutral" rate has been created
and the employee will be able to choose for this rate to be
communicated to their employer, instead of their actual rate.
The employee will be able to change his or her tax rate option
on the secure portal at any time.
End of 2017: employers will retrieve the
employees' tax rates via the portal and apply them for the
entire year 2018. The practicalities for this data collection
process are yet to be published.
Monthly filing to the tax administration will
be completed by the employer using the all-electronic
"DSN". Payment practicalities are yet to be
At the end of the year, the employee is still obligated to file
their usual annual income tax declaration to the tax centre. A
reconciliation will be made between their 12 monthly payments by
their employer, and their actual tax due. The balance, if any, will
be paid by the employee directly to the tax administration.
In the first year – the "transition" year
– in order for employees to avoid paying their income tax
twice, the government has decided to cancel the annual income tax
of year 2017. Exceptional incomes and tax credits pertaining to tax
year 2017 will, however, be taken into consideration for the
calculation of the tax rate.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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