You are an employer and you are wondering how to apply withholding tax or tax deduction at source to the salaries of your employees.
You are an individual and want to know how your earned income is being taxed.
Taxation in France
Earned income has been subject to income tax collection at source since 1 January 2019.
There are various types of earned income:
- Wages and salaries paid under an employment contract
- Pensions and life annuities
- Industrial and commercial profits (BIC) originating from a commercial occupation
- Non-commercial profits (BNC) originating from a liberal profession or being the product of earnings that do not fall under any other category
- Agricultural profits (BA) originating from the exploitation of rural assets
Net earned income, consisting of gross taxable income after the deduction of certain professional expenses and social security contributions, is subject to the progressive scale of tax.
A completely new payment system for income tax came into force on 1 January 2019. Tax is now deducted at the same time income is received by means of an advance payment system (withholding tax), regulated following the submission of the income tax return for the corresponding year.
For example, for salary received during 2019, you are subject to a withholding tax (advance payment) on your monthly salary deducted by your employer according to a rate calculated by the tax authorities.
The following year, during May/June 2020 (depending on the timetable of the tax authority), you are required to submit an income tax return declaring all your income for 2019.
Following this submission, the tax authority issues a tax assessment during August/September 2020 with the final amount of tax due, after the deduction of the withholding tax already paid during 2019.
For non-residents, there is a system of withholding tax applicable for wages, salaries, pensions and life annuities at different rates applying to each income bracket.
Withholding tax is applied in accordance with an annual, quarterly, monthly, weekly or daily scale, after deducting an allowance of 10%.
For information purposes, the withholding tax scale for 2019 is as follows:
Rate of 0% for the amount of income less than
Rate of 12% for the portion of income
between €14,839 and €43,047 (annually)
between €3,710 and €10,762 (quarterly)
between €1,237 and €3,587 (monthly)
between €285 and €828 (weekly)
between €48 and €138 (daily)
Rate of 20% for the portion of income over
The taxation of earned income can be complex and the assistance of a tax lawyer may be necessary.
Altexis offers you advice on any question relating to the taxation of earned income in France:
- We can check whether the arrangements made in your company with respect to withholding tax and collection at source are acceptable.
- We can help you with the taxation of your earned income by calculating the taxable amount and then how to submit a return.
- We can provide you with any tax analysis relating to earned income.