How Companies Should Prepare For The New PAYE Tax System In France Mr Alix Mugnier

Author:Mr Alix Mugnier
Profession:TMF Group

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...

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