Tax Revolution In France In 2018

Author:Mr Alix Mugnier
Profession:TMF Group

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 previous year.

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 employee.


This change will result in:

a lower net salary for the employee at the end of each month 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 government a considerable amount of additional work for the employer's payroll department. 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 income). Employers...

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