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France – Withholding Tax on Professional Income ‘Bientôt’

France – Withholding Tax on Professional Income

This GMS Flash Alert reports on plans by the French government to introduce a withholding tax system on professional income as of January 1, 2018.


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The French government is planning to introduce a withholding tax system on professional income as of January 1, 2018.1  This GMS Flash Alert discusses the main features, as they pertain to employees, contained in the draft Budget law for 2017, which is currently undergoing parliamentary review.2


France is one of the few countries where employers do not currently withhold employees’ personal income tax from their salaries – at least not from French tax resident taxpayers.  At present, employees are responsible for paying their own income tax, upon the receipt of an assessment after the filing of a tax return usually in the year following the receipt of the income.

The new withholding rules, if enacted, could mean important changes to companies’ payroll systems, as well as the relations and information flow between the tax administration, companies, and individual taxpayers.    

What the New Withholding System Entails

If the measures contained in the draft legislation are approved in their current form, then, effective January 1, 2018, French employers will be required to withhold personal income tax from the salary paid to employees each month.

The French tax administration will calculate the employee's individual tax rate based on the prior year's annual declaration.  The calculation will take into account the income from the employee's household.  Employers will be notified of the employee's individual rate via a government-administered secure portal. 

The tax authorities will determine the tax withholding rate in the second half of 2017 based on the 2016 tax returns submitted in May 2017, and communicate the rate to the employee and employer. 

As of January 1, 2018, employers will deduct the withholding tax and pay the tax directly to the tax authorities.

Employees will still be required to file an annual income tax declaration. Monthly payments will be compared with the actual tax due. The balance, if any, will be paid by the employee to the tax administration.

The government has decided to cancel the annual income tax of calendar year 2017 – the so-called “transition" year.  Exceptional income and tax credits pertaining to tax year 2017, however, will be taken into consideration for the calculation of the tax rate and could remain taxable. 

Special rules will apply to income not subject to withholding (e.g., business income, rental income) or for employees where there is an employer not established in France.  Rules relating to tax on passive income will remain unchanged.


If the proposals go ahead, the introduction of withholding tax will have a dramatic impact on the payroll processes of all employers with employees working in France.  From a global mobility standpoint, employers will need to assess how the withholding tax will impact their global payroll processes and program costs. International assignment policies may need to be revised and clear communications to employees regarding the changes will be crucial.

If employers have any concerns about what will be required of them, they should consult as soon as possible with their qualified tax professional.


1 For prior coverage, see GMS Flash Alert 2015-085 (July 14, 2015).

2 Readers may find the text of the draft legislation together with parliamentary debates (in French), here.


For further information or assistance, please contact your local GMS or People Services professional, or one of the following professionals with FIDAL Direction Internationale in France:


Alain Loehr  


Tel. +33 (1) 55 68 15 66 


Ann Atchadé


Tel. +33 (1) 55 68 16 96

The information contained in this newsletter was submitted by FIDAL. FIDAL is an independent law firm with which KPMG has a cooperation agreement. 

© 2021 FIDAL, a French socit dexercice libral forme anonyme directoire et conseil de surveillance. FIDAL is an independent legal entity that is separate from KPMG International and its member firms. All rights reserved.

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Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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