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France – A New System for Income Tax Collection

Unlike the UK, historically France has not had a PAYE system for collecting income tax at source. Instead in France taxpayers would file an income tax return in the year following the year in which the income was received.

From 1 January 2019 in France a new income tax system will apply. This essentially means that French taxpayers now pay income tax monthly (or quarterly in some instances). This will apply to most types of income including wages, rental income, business income, pensions and foreign income taxable in France such as UK private pensions.

Where possible the tax will be deducted through a PAYE system. For example, for wages, previously French employees were responsible for paying income tax and filing their own income tax returns. Now, similarly to the UK, French employers will make this deduction, and this will be shown on the employee’s pay-slip.

Where it is not possible to deduct the tax by PAYE, the tax with be paid from the person’s bank account. For example, for rental income individuals previously included this on their income tax return and were responsible for paying the income tax. From 1 January 2019 the tax will be collected monthly or quarterly by direct debit from the taxpayer’s nominated bank account.

The main reason behind the change is to avoid the year delay on payment of tax on income and ensure tax is paid on income as and when it is received.

For advice on UK or French Tax, please contact Graeme Perry, Head of International and Cross Border Tax.