The countdown is on to the January start of withholding tax at-source in France, and now is the time for payroll departments to get ready for the change.
The implementation of a PAYE (pay-as-you-earn) tax system in France has been a long time in the making. It was abandoned time and time again over the years due to various cultural and technical obstacles. But from 1 January 2019, 'prélèvement à la source' - withholding tax at-source – will apply, and employers must be ready to withhold income tax from their employee payslips when they prepare the monthly payroll.
So what do companies need to do now, to prepare? Following is a checklist, but for a complete overview, download the free eBook.
1. Make sure your employees are aware of the change
This step should already be completed, and most workers in France will be aware of the incoming PAYE tax system thanks to a comprehensive government advertising campaign. As an employer, your obligation is to direct your staff to the French government's online resources and dedicated helpline.
2. Check your technical readiness for PAYE
A technical readiness assessment should be completed with your payroll administrator or department in this fourth quarter of the year, so everything is ready for the January 2019 payroll run.
Your payroll team should be appropriately trained and by now should have received the individual employee tax rates. Your payroll software should be updated to accommodate the PAYE system and prefiguration carried out. If you need help or clarification, don't hesitate to get in touch with TMF Group's French HR and payroll team to find out how we can help.
Employers will report individual taxable incomes to DGFiP (Direction Générale des Finances Publiques) monthly via an e-filing and pay the consolidated amount of employee income taxes through a single automatic SEPA (Single Euro Payments Area) debit.
3. Identify any non-standard employee cases
Non-standard cases may exist for your payroll department if you have any employees who are:
- non-French tax residents
- living on the French islands
- on extended sick leave
- on a guaranteed net pay agreement
- new to the company.
These cases should be addressed individually in order to ascertain the correct tax rate to apply to their monthly salary. You should seek the help of a tax specialist, lawyer or expat agency as required.
4. Anticipate additional costs
You should expect to incur additional costs under the new PAYE tax system if you have expat employees with unusual tax statuses, you don't have a SEPA-ready bank account or if you're a foreign company from a country without a tax treaty with France.
If you already use a payroll service provider – like ourselves – to pay your employees in France, an increase in processing fees can be expected. This is to cover the additional work and costs incurred by payroll and software vendors.
5. Ask for help from local experts
The PAYE system is a big change to the way employee income tax is collected in France, and you don't have to navigate it alone. https://www.tmf-group.com/en/locations/emea/france/ TMF France's HR and payroll team can provide you with guidance on the practical aspects of PAYE implementation, and assist in communicating with the relevant tax centres.
Our comprehensive HR and payroll services are provided in-country, in the local language, and in line with French laws and customs. We are focussed on helping you stay compliant, so you can focus on your core operations. Make an enquiry with us today.
Learn more in our eBook: New PAYE system in France: How to prepare.
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.