Global expansion is a great way to grow your business, and France offers many appealing opportunities. However, tax in France can be complex and require time-consuming research. When using our PEO services, we take care of the complicated legwork so that you can focus on your business goals in France.
With over 20 years of experience in the front rank of international payroll providers, Bradford Jacobs ensures our clients comply with every level of tax and employment law worldwide. Our ‘know-how’ is vital for foreign companies expanding into France. Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. It poses major issues for companies seeking to develop their international profile. France is no exception, with fines, sanctions and other penalties applying for not complying with the complex and many-layered aspects of taxation.
Our guide unravels the ‘red tape’ and highlights how Bradford Jacobs will assist your company with untying the knots.
Personal Income Tax (PIT)
11% – 45%, plus percentage surcharges for high incomes.
Corporate Income Tax
Corporation Tax was reduced to 25% in 2022. The Finance Bill of 2018 charted a steady decrease in Corporate Income Tax (CIT) from 33.33% (28% on the first €500,000, US$590,000) in 2018 down to 31% in 2019 and 28% in 2020. Additional to standard CIT, businesses must also make a social contribution, assessed at 3.3% of CIT due. Businesses with turnover below €7.63 million (US$9 million) are exempt. Companies must also make a solidarity contribution of 0.13% of net turnover.
Value Added Tax (VAT)
The standard VAT rate is 20%, with 2.1%, 5.55% or 10% applying to other categories. There is no minimum threshold for registering. Customs and excise duties are payable on all goods imported from outside the European Union.
Capital Gains Tax
French residents are subject to capital gains tax at 19% in addition to social charges of 17.2%. These are tied to capital gains levels, which for-profit over €250,000 (US$294,240) can create total deductions of 42.2%.
Dividend Income
These are either taxed at a fixed rate of 12.8% or in line with general tax rates after deducting 40% to compensate for company tax already paid on distributed profits. Capital income also attracts social contributions of 17.2%.
Withholding Tax
Dividends paid to non-resident individuals or companies attract a 30% withholding tax, which can be increased to 75% for ‘non-cooperative’ territories regarding their money laundering policies.
Property Tax
3% paid by foreign and French companies on property owned directly or indirectly.
Wage Withholding Taxes
50% (average) of gross pay for employers and 20% average for employees.
Individual taxes may apply to Investments, inheritance, property, and wealth.
Permitted Deductions
French residents pay taxes on their worldwide income, including employment earnings, pensions, property, interest, dividends, and other investments, as follows:
| From | Not Over | Tax % |
|---|---|---|
|
EUR 0 |
EUR 10,084 (USD 10,904) |
0% |
|
EUR 10,085 |
EUR 25,710 (USD 27,586) |
11% |
|
EUR 25,711 |
EUR 73,516 (USD 79,496) |
30% |
|
EUR 73,517 |
EUR 158,222 (USD 171,065) |
41% |
|
From EUR 158,223 |
- |
45% |
Liability to pay French income taxes generally depends on residency. Article 4B of the Code Général des Impôts (CGI) states that an individual living in France for 183 days in a calendar year is a tax resident. This will apply even if businesses are in other countries where fewer days are spent. Tax residency in France depends on where most time is spent, not where most income is earned.
The tax year runs from January 1 until December 31, with returns due by mid-May on specific dates from the authorities, usually specified in March or April. French residents are taxed on worldwide income. Non-residents are taxed only on French income, with tax due for the first year generally not paid until September 15 of the following year, at 20% up to €27,519 (US$29,752 and 30% above that.
A Pay-As-You-Earn (PAYE) system has been applied in France since 2019, meaning individuals are taxed at the source instead of having to declare the previous year’s income.
Tax rules also apply to employers running payroll for individual employees. Employers must obtain the individual’s tax number by applying with Form 2043 to the Ministry of Economy and Finance and registering with the Tax Administration and the social insurance authorities. They must also report regular and overtime working hours relating to salary, tax-exempt elements on the monthly pay slip, and withholding tax and social security deductions.
France belongs to the Automatic Exchange of Information (AEOI), which combats tax evasion by requiring financial intermediaries to declare their clients’ tax residences in signatory countries.
Employers’ statutory costs include percentages based on employees’ salaries to various social insurance funds. These are administered by The Ministry for Solidarity and Health and the Ministry of Economy and Finance. It covers benefits for all salaried workers in the private sector through a network of national, regional, and local institutions and consultation with employers and employees. Around 80% of revenue comes from contributions and taxes calculated on percentage rates from employers and employees.
These are calculated on total earnings, as follows:
| Category | Employer | Capped Monthly |
|---|---|---|
|
Health, maternity, disability, death |
13% or 7& |
- |
|
Autonomy solidarity contribution |
0.3% |
- |
|
Old-age insurance (with upper limit) |
8.55% |
EUR 3,428 (USD 4,044) |
|
Old-age insurance |
1.90% |
- |
|
Workplace accidents |
(variable) |
- |
|
Family Benefits |
5.25% or 3.45% |
- |
|
Unemployment |
4.05% |
EUR 13,712 (USD 16,176) |
|
Unemployment wage guarantee (AGS) |
0.15% |
EUR 13,712 (USD 16,176) |
|
Supplementary pension (bracket 1) |
4.72% |
EUR 3,428 (USD 4,044) |
|
Supplementary pension (bracket 2*) |
12.95% |
- |
*Bracket 2 applies between €3,428 (US$4,044) and €27,424 (US$32,353)
For more information, download our free guide or get in touch with our consultants here