French Corporation Tax and French Dividend Tax from 1 January 2018

Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. No liability is accepted by the author or Sykes Anderson Perry Limited in respect of this article. French tax law is a complex subject and the above is a basic outline only and is intended only as a general guide. Nothing herein constitutes financial advice.

Corporate Taxation for 2018

For businesses for 2018 French corporation tax is as follows:-

  • 15% on the first €38,120 profits

  • 28% up to €500,000 and

  • 3 % over €500,000.

Dividend Tax from 1 January 2018

From 1 January 2018 dividends paid to French residents are taxed at a flat rate of 30%. This comprises income tax of 12.8% and social charges of 17.2%. It is called Prélèvement Forfaitaire Unique (PFU) and is a flagship change brought in by President Macron. This is deducted when the dividend is paid and the recipient has no further liability. It is still possible to elect for the previous method of taxation which will suit people with low incomes. This is a major change in French taxation and is to be welcomed.

  • For entrepreneurs running their own company it is likely to be better to take higher dividends than salary. A total rate of 30% including social charges is attractive.

  • For non-French resident shareholders the maximum French tax which can be withheld when a dividend is paid out of France is now 12.8%, though in most cases a double tax treaty will reduce this to zero.

Simple Calculation

Assume a SARL owned by one person with net profits of €300.000. The corporation tax will be (15% X 38.120) + (28% X 261.880) = €79.044.

This leaves €220.956 in the company. If this is all taken as a dividend the tax/social charges on the shareholder is €66.286.

The net cost is €145.330 leaving €154.670 net in the shareholders pocket. This amounts to a total tax cost of 48.4%.

March 2018
David Anderson
Solicitor-Advocate and Chartered Tax Adviser
Sykes Anderson Perry Limited