Do you have employees on a French payroll? Then you might have to take into account a new payroll obligation as of January 1, 2019: Prélèvement à la source, or the deduction of withholding tax at source. This measure derives from a French tax reform and affects wage administration. Jeroen Janssen, Legal Consultant at ACERTA, gives his detailed comments on this new obligation.
Until now, there was no monthly deduction of French taxes via the payroll for French nationals working in France. Such employees pay their taxes via their annual French income tax return.
On January 1 2019, this will change. From next year, income tax will be deducted by the employer in the payroll from the taxable salary of the employee. The employer will need to deduct this withholding tax for the first time in the course of January 2019. This deduction will also appear on the French payslip.
The following items are important:
The French tax authorities will determine the withholding tax rate (taux réel) for each employee individually. This rate takes into account the employee's entire income of the previous year. In case the employee desires to implement a different rate, he/she can request this to the tax authorities.
There are 2 alternative rates possible:
In case your employee addresses questions to you about the tax rate, you should refer him/her to his/her tax office.
For French non-residents (e.g. Belgian residents working in France) who already make use of the existing system of quarterly tax declarations, Rétenue à la Source (RAS), nothing changes.
And no Prélèvement à la source should be applied for French cross-border workers working in Belgium for a Belgian company under the special cross-border workers regime either. Cross-border workers transfer their own monthly tax amount to the French tax authorities. This amount corresponds with the amount the employer would have deducted in Prélèvement if the employer would have been located in France.
Would you like tailor-made advice in this respect? Contact ACERTA Tax & International for more information.