The French tax system is due to change – are you up to speed?
Moving away from the convoluted and rather complex tax system that is currently in place in France, to a Pay-As-You-Earn (PAYE) system like that used in most European countries, has been in the French governments’ pipeline for a while now. However, the decision came on Wednesday the 16th March 2016 to in fact advance this reform and thus change the way that tax is to be paid in France.
Firstly, what will change and who will it affect?
Under the current French system, taxpayers complete an annual tax return that determines the tax bill for the following year. Therefore, earnings from one year will not be taxed until the following year. Most French taxpayers choose to pay estimated amounts on a monthly or thrice-yearly basis, taking into account the figures from previous years.
In the future and under the new Pay-As-You-Earn (PAYE) system, the tax due will simply be deducted from one’s monthly salary, although yearly tax declarations will still have to be made.
This reform extends to salaries, property income tax, tax to be paid on pensions, income earned by freelancers, and replacement income such as unemployment benefit.
When will it happen and who is to implement the change on the French Tax System?
This reform won’t officially take place until January 2018 however it is important for companies to understand the details of these changes well in advance, due to the fact that under these new regulations, the job of deducting income tax from workers’ salaries, in this particular case, will in fact fall to them.
As of early 2018, it will be the company’s responsibility to contact the French financial authorities and obtain the relevant tax code for each employee, and subsequently deduct the correct amount from their salary. As is such, employees can expect to see an additional line on their payslips.
In terms of pension tax the entity responsible will be the relevant pension company. Tax on replacement income such as unemployment benefit will be managed by Pôle Emploi (The Unemployment Centre), as will tax on property income. Lastly, freelancers’ will continue to manage their own taxes on their income. However, in all cases this will become a monthly task.
Here at Maupard we understand that this is a big change. If you have any queries about how this reform on the French Tax System will affect you, and what it is that you need to do to stay ahead, please do not hesitate to get in touch. We would be glad to answer any questions you may have, and ensure that when the change comes, you are ready.
Contact us via telephone +33 (0) 1 53 93 94 20 or [email protected].
Our team of experts will happily assist you with any queries you might have.