Income tax withholding: France simplifies the withholding tax procedures for foreign companies employing workers who work from their home in France.
January 1, 2023 – As the head of a company established outside of France, you’re no longer required to withhold income tax from the salary that you pay to some of your employees who are temporarily working from home in France. Indeed, the French tax authorities have decided to simplify the procedures for withholding tax.
THE NEW PROCEDURES
Your employees should go to the “gérer mon prélèvement à la source” module of their e-services account at www.impots.gouv.fr to calculate their estimated tax and schedule its payment. The French tax administration will then take out the money from your employee’s bank account. They won’t have a big tax bill at tax time a year later if they pay estimated tax as they receive their salary. The estimated tax that your employees must pay is determined based on their salary in France and their personalized withholding rate.
Going forward, all you have to do is to report every year to the French tax administration their salary that is subject to French income tax. You may transmit this information to the French tax administration through the traditional communication channels.
If you’re having trouble transmitting the information, you may send a message to your local DGFiP office from your e-services account or call at 0 809 401 401. This is not a premium-rate line.
ELIGIBILITY REQUIREMENTS
To be eligible for the program, your company must meet the following conditions:
- You don’t have a permanent establishment in France.
- You have a permanent establishment in one or more of the following countries: Germany, Austria, Belgium, Bulgaria, Cyprus, Croatia, Denmark, Spain, Estonia, Finland, Greece, Hungary, Ireland, Iceland, Italia, Latvia, Lithuania, Luxemburg, Malta, Norway, the Netherlands, Poland, Portugal, Czech Republic, the United Kingdom, Romania, Slovakia, Slovenia, Sweden.
- You employ workers who are French resident for tax purposes.
- Your employees don’t fall under a mandatory French social security regime during their payment period.
- Your employees carry out part of their activity in France from time to time by telecommuting.
For the United Kingdom, your employees must meet certain requirements to qualify for the program. They must be:
- French resident for tax purposes ;
- Covered by the British social security system before January 1, 2021 and remained covered without interruption.
(Article 30 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community of October 17, 2019)
To reduce foreign employers’ compliance burden, the Government in the 2023 budget provides for the replacement of the withholding tax system with an estimated tax payment system. As a result, foreign employers are no longer required to use the PASRAU filing channel for the salaries that they paid to their staff who are French resident for income tax purposes.
Typically, foreign employers must withhold income tax from the salaries that they pay to their employees who live and work in France. The employer must then remit the tax thus withheld to the French tax administration. However, the practical application of this withholding system has been challenging for some foreign employers who employ the following categories of workers:
• Employees who are French resident for tax purposes;
• Who from time-to-time work from their home in France; and
• Who don’t fall under the French mandatory social security regime.
These employers had to:
• Register with the Direction des impôts des non-résidents (DINR), the nonresident taxpayers’ tax office; and
• Remit every month through the Passage des Revenus Autres (PASRAU) filing channel the amount withheld.