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France To Delay Pay As You Earn Tax For Individuals

by Ulrika Lomas, Tax-News.com, Brussels

09 June 2017


The French Government has decided to postpone the introduction of pay-as-you-earn (PAYE) income tax withholding while further checks and tests are carried out on the new system.

Plans for a PAYE system, whereby employers withhold tax from an employee's pay and remit it to the tax authority, were included in 2017 Finance Bill, approved in December last year.

At present, French taxpayers pay income tax annually in arrears, meaning that as things stand, income earned in 2017 for example, will be paid by the taxpayer in 2018.

Most forms of income will be subject to PAYE, including employment income, self-employment income, pensions, annuities, and rental income, although non-resident taxpayers subject to withholding tax, and foreign income which qualifies for the application of a French foreign tax credit will not be taxed at source under the new scheme.

The new system was originally scheduled to be introduced on January 1, 2018. However, Prime Minister Edouard Philippe revealed in an interview with Le Parisien that it would not now be introduced until 2019 to ensure that it is rolled-out with as few glitches as possible.

The postponement also comes after the proposed changes were criticized by companies worried about a significant increase in their tax administrative burdens.

Philippe revealed that trials involving a number of companies will be carried out on a voluntary basis from July to September, 2017.

"As it's a question of people's money and the state's revenue, I don't want to commit myself to this reform without being sure that it will all work well from a technical point of view," the Prime Minister was quoted as saying.

TAGS: Finance | tax | pensions | tax authority | self-employment | withholding tax | France | individual income tax

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