Since January 2019, the French have switched to the withholding tax on the income. This system, called P.A.S. ("Prélèvement à la Source"), is intended to simplify the payment of income tax. The new neutral rate scale has just been published.
The withholding tax has changed the way income tax is paid for millions of employees living in France. It has made mandatory for their employers to meet new obligations. These obligations were tricky to implement and required great efforts from companies.
Calculating the amount of withholding tax to be paid, who is concerned?
The calculation of the amount to be paid concerns companies employing employees who are French tax residents. These companies withhold the amount of tax for which the taxpayer is liable. They do this directly from the wages paid. They then transfer it to the French tax authorities. This amount is calculated on the basis of :
- personalised P.A.S. rates transmitted by the tax authorities
- or, failing that, non-personalised rates, known as "neutral rates".
What is a neutral rate?
Neutral rates are for employees that do not have a valid personalised rate available[1]. These neutral rates are predefined in grids that are modified each year. They are included in the General Tax Code (CGI art 204H).
However, these neutral rates do not take into account the situation of the taxpayer. For example :
- whether or not the employee, a French resident, has children,
- personal service expenses such as cleaning costs that are partially deductible.
Reminder: You must apply the rate scale in force at the date of payment of the wage. However, if the rates change, the debtor may apply the updated rate scale to income paid from the month following their effective date.
New 2022 grid, which neutral rate to apply?
The income brackets for the "neutral rate" of the PAS have been published. They will apply to income received or earned from 1st of January 2022. They are as follows:
| Rate-neutral grids as of January 1st 2022 | |||
| Monthly debit basis | |||
| Taxpayers domiciled in France or outside France | Taxpayers domiciled in Guadeloupe, Reunion and Martinique | Taxpayers domiciled in Guyana and Mayotte | |
| < 1 440 € | < 1 652 € | < 1 769 € | 0,00% |
| ≥ 1 440 € et < 1 496 € | ≥ 1 652 € et < 1 752 € | ≥ 1 769 € et < 1 913 € | 0,50% |
| ≥ 1 496 € et < 1 592 € | ≥ 1 752 € et < 1 931 € | ≥ 1 913 € et < 2 133 € | 1,30% |
| ≥ 1 592 € et < 1 699 € | ≥ 1 931 € et < 2 108 € | ≥ 2 133 € et < 2 404 € | 2,10% |
| ≥ 1 699 € et < 1 816 € | ≥ 2 108 € et < 2 328 € | ≥ 2 404 € et < 2 497 € | 2,90% |
| ≥ 1 816 € et < 1 913 € | ≥ 2 328 € et < 2 455 € | ≥ 2 497 € et < 2 583 € | 3,50% |
| ≥ 1 913 € et < 2 040 € | ≥ 2 455 € et < 2 540 € | ≥ 2 583 € et < 2 667 € | 4,10% |
| ≥ 2 040 € et < 2 414 € | ≥ 2 540 € et < 2 794 € | ≥ 2 667 € et < 2 963 € | 5,30% |
| ≥ 2 414 € et < 2 763 € | ≥ 2 794 € et < 3 454 € | ≥ 2 963 € et < 4 089 € | 7,50% |
| ≥ 2 763 € et < 3 147 € | ≥ 3 454 € et < 4 420 € | ≥ 4 089 € et < 5 292 € | 9,90% |
| ≥ 3 147 € et < 3 543 € | ≥ 4 420 € et < 5 021 € | ≥ 5 292 € et < 5 969 € | 11,90% |
| ≥ 3 543 € et < 4 134 € | ≥ 5 021 € et < 5 816 € | ≥ 5 969 € et < 6 926 € | 13,80% |
| ≥ 4 134 € et < 4 956 € | ≥ 5 816 € et < 6 968 € | ≥ 6 926 € et < 7 620 € | 15,80% |
| ≥ 4 956 € et < 6 202 € | ≥ 6 968 € et < 7 747 € | ≥ 7 620 € et < 8 441 € | 17,90% |
| ≥ 6 202 € et < 7 747 € | ≥ 7 747 € et < 8 805 € | ≥ 8 441 € et < 9 796 € | 20,00% |
| ≥ 7 747 € et < 10 752 € | ≥ 8 805 € et < 12 107 € | ≥ 9 796 € et < 13 179 € | 24,00% |
| ≥ 10 752 € et < 14 563 € | ≥ 12 107 € et < 16 087 € | ≥ 13 179 € et < 16 764 € | 28,00% |
| ≥ 14 563 € et < 22 860 € | ≥ 16 087 € et < 24 554 € | ≥ 16 764 € et < 26 866 € | 33,00% |
| ≥ 22 860 € et < 48 967 € | ≥ 24 554 € et < 53 670 € | ≥ 26 866 € et < 56 708 € | 38,00% |
| ≥ 48 967 € | ≥ 53 670 € | ≥ 56 708 € | 43,00% |
The tax representation Withholding tax representation of a foreign company* is MANDATORY!
*Except for a shortlist of countries set by decree of 15 of May 2013.
It concerns companies established outside the European Union which employ one or more employees in France: local representative, project manager, directors, sales representatives...
What is the role of the P.A.S. tax representative?
The tax representative verifies and guarantees the payment of income tax deducted from French wages. He is approved by the French tax authorities. This obligation arose because of the difficulty of tracking down and prosecuting companies established outside the EU (European Union) in the event of non-payment.
This shows how much confidence you must have in your tax representative. The latter's technical tax knowledge is essential to protect you against all types of reassessment.
The longer the implementation of tax representation is delayed, the more costly regularisation can be. It is urgent to comply. That is why FISCALEAD sets up the tax representation in 5 days. We liaise with your accounting or payroll service provider. Thus, with your agreement, FISCALEAD takes care of the follow-up of the amounts due. It guarantees them to the French tax authorities on your behalf.
Contact us to validate your compliance with the French withholding tax!
[1] Some individuals may choose not to communicate their personalised rate to their employer and prefer the employer to apply the neutral rate for reasons of confidentiality, others may have delays in filing their tax returns with the French tax authorities. Indeed, even if tax is deducted, individuals must still file their tax return on time.