The Draft Finance Bill for 2023 plans to reduce withholding tax obligations for foreign employers of French tax residents

October 23, 2022

A new wage tax withholding system has been applicable in France since 1 January 2019, burdening employers with the responsibility of withholding personal income tax from their employees’ taxable salaries and paying it monthly to the French tax authorities. This new system applies to all French tax residents receiving French source employment income, regardless of whether their employer is located in France or abroad, and involves a rather complicated identification procedure for foreign companies with no establishment in France and complex monthly reporting obligations (the so-called “PASRAU declaration”).

The Draft Finance Bill for 2023 plans to reduce withholding tax obligations for foreign employers of French tax residents

It seems that the many complaints made to the French tax authorities about this complex process were heard since the Draft Finance Bill for 2023 proposes to abolish the obligation to withhold tax at source for employers:

Such employers would, however, remain subject to an annual reporting obligation of the French source salaries paid to their French resident employees. The date and process for filing such declaration remain to be defined by the government.

In case of breach of such reporting obligation, the Draft Bill provides for a fine which, without being less than EUR 500 or more than EUR 50,000 per declaration, would be equal to:

Wage tax on such employees’ French source salaries would be taxed through advance payments debited directly by the tax authorities to the employees’ bank account.

Key points to remember:

More details should be available over the next few weeks.

Find out more

This article was produced by Stéphanie Le Men-Tenailleau, Partner specialized in tax law at Galahad, France, a CELIA Alliance member firm.

For further information or if you have any queries relating to the content of this communication, please contact us.


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