Withholding taxes for all!
In France, you are currently taxed on the amount of income that you received in the previous year.
From 1st January 2019, things will change with the introduction of withholding tax! This new system will remove the 1 year gap between income collection and taxation and will adapt more quickly to changes in your financial and family circumstances.
Who will collect your taxes?
If you are a French tax resident:
- Your employer will directly and automatically deduct income tax from your salary before paying it to you.
- If you are retired, the deduction will happen similarly from your pension fund.
- If you are self-employed, a farmer or a landowner, you will pay instalments which are deducted directly by the tax authorities on a monthly basis.
If you are not a French tax resident:
The tax authorities will deduct the installments directly from your bank account. Your 2019 instalments will be calculated and deducted automatically on the basis of your income tax return filed in the spring of 2018. Only property income and income from your activity as an independent operator (BIC, BNC, BA) will be subject to withholding tax. If you receive income taxable through a withholding tax (dividends, interest, real estate gains, salaries and wages, pensions, etc.), then you are not affected.
A personalised tax rate
The tax rate will be calculated by the tax authorities based on your 2018 income.
If your situation changes during the course of the year (change in revenue, marriage, birth, divorce), you can ask to change your tax rate accordingly. Careful though, you must signal this situation change to the tax administration within 60 days of it occurring!
Whether you are a French tax resident or not, the year 2018 constitutes a “blank year”: to avoid double taxation in 2019, a tax credit will neutralise the tax on your income earned in 2018. The tax credit is called “CIMR” (“Crédit de modernisation de recouvrement”) and will be deducted the tax on your income earned in 2018, calculated in 2019.
Could you benefit from CIMR?
The CIMR neutralises only the regular income from the year 2018. Any exceptional income or deductions, will be regularised in 2019.
To benefit from this tax credit, you must, as usual, fill out your income declaration for 2018, in the spring of 2019. In the summer of 2019, the tax administration will spontaneously apply the CIMR after reviewing your situation.
If you have any questions regarding withholding taxes, do not hesitate to 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.