French tax revolution postponed
Article 3 minute read

French tax revolution postponed

19 July 2017

Withholding ‘at source’ the personal income tax of French employees and reflecting it on monthly payslips was scheduled to begin in 2018, however implementation is now postponed.

During the presidential election campaign, Emmanuel Macron had declared he would postpone the tax reform if he won the election. Following Macron’s election, on 7 June 2017, Prime Minister Edouard Philippe confirmed the postponement of the new system to January 2019. This additional year will be used to test the effective technical feasibility of the new system, using a restricted sample of volunteer companies.

It means, for the majority of companies, that no withholding at source of employee personal income tax will take place in 2018, and the decree confirming this postponement will be published during the summer.

The current system

The reform is designed to replace the current system of personal income tax collection in France, which consists of tax centres collecting personal income tax directly from employees - one year in arrears.

Currently, employers are not involved in the collection of personal income tax. Employers pay the net salary to their employees, and employees are responsible for filing their personal income tax return in May of the following year. Tax centres calculate the past year’s income tax based on the entire household’s income, and generate the tax bill, which employees have to pay in several installments throughout the year.

There is therefore, a full years’ delay between the moment the income is earned, and when the income tax is fully collected.

The future system

Under the now-postponed reform, employers will be asked to withhold the income tax and reflect this in monthly employee payslips, using a pre-defined, individualised tax rate provided by the tax administration.

At the end of each month, the income tax filings will be completed by the payroll vendor, via the monthly e-filing called ‘DSN’, and employers will pay all their employees’ income tax to their local corporate tax centre in one single bank transfer.

The employers’ local tax centre will then dispatch the individual income tax amounts to each employees’ local tax centre.


This reform has been criticised by employers who believe it will create a lot of extra work for their payroll and finance departments. Employees are also concerned about the reduction of net pay, and their employer being made aware of their individualised tax rate; this is regarded as a sensitive personal data in France.

Transition year between the two systems

In 2016, the former government had voted in favour of a national tax credit covering the entire 2017 tax year. The purpose of this tax credit was to avoid double taxation in 2018. Without this tax credit, employees would have been made to pay twice in 2018: the year 2017 income tax is paid one year in arrears, and when the monthly at-source deduction from pay cheques was due to commence in real time.

Last year, most companies began communicating with their employees about the future reform, and some employees had made their 2017 financial plans with a view to make the best of the full tax credit on the 2017 tax year. This is now cancelled, and employees will pay their income tax as usual in 2018, on their 2017 income. However, this opportunity will again present itself in the year 2019.

Talk to us

Once the implementation of the new law is confirmed, TMF France’s payroll experts will be available to provide guidance to all clients about the practical details, including communication with employees and coordination with the tax centres.

Need more information? Get in touch with our team in France.

Find out how our HR and payroll services can help streamline your business operations.

Written by

Alix Mugnier

Payroll Manager, TMF France

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