France – Plans to Institute Income Tax Withholding on Remuneration

France – Plans to Institute Income Tax Withholding..

France’s Minister for Finance and Public Accounts and the Secretary of State for Budget presented to the Council of Ministers on June 17, 2015, a communication on the introduction -- as of January 1, 2018 -- of income tax withholding on remuneration income. No concrete details regarding this proposal have yet been made public. The introduction of income tax withholding could represent a major challenge for employers and even more so when considering inbound and outbound expatriates.

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The French government is planning to introduce income tax withholding on remuneration paid to resident taxpayers.

France’s Minister for Finance and Public Accounts and the Secretary of State for Budget presented to the Council of Ministers on 17 June 2015, a communication on the introduction – as of 1 January 2018 – of income tax withholding on remuneration income (prélèvement à la source).1  

WHY THIS MATTERS

Instituting income tax withholding could represent a major challenge for employers and even more so when considering inbound and outbound expatriates. 

Currently in France, income tax is not deducted at source from the remuneration paid to resident taxpayers.  Instead it is paid after the receipt of an assessment further to the filing of an income tax return in the year following the receipt of the income.

No concrete details regarding this proposal have yet been made public.  It is expected that there will be more specific information on the mechanism in the Draft Budget law for 2017, which will be published at the end of 2016.

FIDAL NOTE

The government cited similar systems in place in many industrialized countries, such as the U.S., the U.K., and Germany, as a reason for the move to institute this type of withholding.

No major changes are expected in the calculation of income tax. Notwithstanding, the introduction of income withholding is likely to be a very complex undertaking.  It is expected that taxpayers will still need to file an income tax return to take into account progressive rates of income tax as they apply to their household income and other miscellaneous income received by the household and to claim tax credits and reductions. 

Measures are expected to be proposed as part of the 2016 Finance Bill to promote the use of e-filing and payment of tax by way of monthly installments. 

FOOTNOTE

1  See (in French) the 17 June 2015 Council of Ministers news release (“Compte-rendu du Conseil des ministres du mercredi 17 juin 2015‟) at:

http://www.elysee.fr/conseils-des-ministres/article/compte-rendu-du-conseil-des-ministres-du-mercredi-17-juin-201/.  

CONTACTS

For further information or assistance, please contact your local KPMG International member firm GMS or People Services professional or the following GMS professionals with FIDAL Direction Internationale at tel. +33 (0) 1 46 24 30 30:

 

Alain Loehr, Partner

Ann Atchadé, Partner

Marie Lynn Simmons, Partner

Estelle Cupillard, Partner

Gérôme Gbaya, Partner

Cyril Klajer, Partner

The following information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.

The information contained in this newsletter was submitted by FIDAL Direction Internationale in France.  The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

© 2016 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.

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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