Controversial French income tax measures delayed for a year

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Under the new policy, employers will be asked to withhold income tax for each employee and reflect the figure in their monthly payslip.

A controversial new policy to withhold the personal income tax of French employees at source and reflect the deduction in their monthly payslip has now been delayed until January 2019.

The aim of the delay in implementing the new system by a year is to enable more time to test its technical feasibility using a sample of volunteer organisations.

Under the current system, local tax centres collect personal income tax directly from employees one year in arrears, based on the income of their entire household. Employers are not involved at all and simply pay their staff a net salary.

Workers are responsible for filing their personal income tax return in May of the following year, which means there is a full year’s delay between when salaries are earned and income tax collected.

But under the new reforms, employers will be asked to withhold income tax for each employee and reflect the figure in their monthly payslip, using a pre-defined, individualised tax rate provided by the authorities. At the end of each month, they will also be required to submit the income tax filings via an electronic system called the ‘DSN’ and to pay the full sum to their local corporate tax centre in a single bank transfer.

But the change in policy has drawn criticism in some quarters. Employers have expressed concern over the extra administrative burden that will be placed on their payroll departments.

Employees, on the other hand, are worried about seeing a cut in their net pay. They are also unhappy that employers will get to know their individualised tax rate, which is regarded as sensitive personal data in France.

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