France: upcoming new withholding tax rules for French non-resident taxpayers

Philip Maertens 18 September 2019


On 1 January 2019, France implemented the greatest change in its personal income tax system in over 40 years through the creation of a Pay As You Earn withholding system for French tax residents. This new system that applies to the great majority of income earned by French tax residents (i.e. wages & pensions) has been a success with 98.5% in tax recovery versus 97% in the old system in the first 9-months of its implementation. It has comforted the French government in its road to changes. As a result, the French Government is now working on the deployment of this PAYE system to non-French tax residents, which should be applicable as from income year 2020.

  • Who is covered – the new regime applies to all non-French tax residents, whether assigned to France, working locally in France, seconded from France to another location or working abroad but receiving other type of income from French source.
  • What types of income are covered – the scope of the regime is very broad, including not just direct employment Different withholding tax rates will be applicable to French non-resident taxpayers on their income in the scope of the reform and there will be different ways for the French tax administration to recover French income tax (withholding, automatic debit…).
  • Key risks and issues – Not only French employers but also foreign employers will have to handle those new requirements, with risks and implications of non-compliance. We may expect complexity for foreign employers to handle registration to the French tax/social administration, to collect details of payments made to non-French tax residents from French/overseas payrolls and manage the French shadow payroll requirements.

 

Further details of the reform are still expected. However, should you already want to discuss that topic so that we share our insights with you and potentially assist you with these new rules, please do not hesitate to contact Sylvie Dumortier.