French Tax at source: all you need to know

France has changed to at-source income tax this year.

23 January 2019
By Hugh MacDonald

In theory, it is a system closer to the one Britons are used to with PAYE, though tax is still levied on households rather than individuals.

In practice, French income tax is now a hybrid between what existed before and a new system. The aim is to levy tax at the same time as income is received rather than in the following year.

Unlike in the UK, it will still be obligatory for everyone to make an annual declaration, to make sure the correct amounts have been paid.

Refunds will then be given – or requests for more payment issued.

It will not change the fact that half of French people do not pay income tax.

The move to prélèvement à la source (PAS) is not an initiative of President Macron but was agreed under his predecessor François Hollande.

Mr Macron merely put it back by a year to give more time to prepare.

Tax workers were worried there could be bugs in the system, leading to a lot of extra work helping people, either over the phone or face to face.

However, Public Accounts Minister Gérald Darmanin is “confident” things will go well and no major issues have yet been reported.

He said: “People were predicting there would be a major bug on January 1, and we wouldn’t be able to do anything – it wasn’t the case.”

Who collects people’s income tax?

As in the UK, it is now mostly collected by whoever pays you the income: a French pension provider in the case of pensions, or your French employer in the case of employees. In other cases, estimated amounts based on the previous tax declaration are debited from people’s bank accounts.

Why did I get tax taken at source on income from December 2018 that was paid into my bank account at the start of January?

Because the PAS applies when you receive the income, not when you worked to earn it. You would not include the amount in your declaration of 2018 income, which you will complete this May/June, but rather next year (not for it to be taxed again, but for verification).

A generalised tax credit is being applied to most kinds of 2018 income to cancel out tax that would otherwise have been due on it, so people are not paying double tax in 2019. This will not apply to this income as it will be part of your declaration for 2019.

Is tax taken every month or for 10 months, like in the old income tax mensualisation instalments?

It is every month, unlike the old system, which was a slight misnomer as it only applied from January to October. If you had the old system, you will now probably be paying a bit less each month, but with no gap.

I have paid French tax for years. Do I have to do anything in particular to have the PAS applied?

No. There is no obligatory action to take. If you are due to have instalments taken, the tax office should have your bank account details that you filled in on a previous tax return. If you are an employee or have a French pension, a rate will have been passed to the employer or provider.

What day of the month are monthly instalments taken?

Instalments, where payable, will be taken out on the 15th of the month.

What rate am I paying?

Your rate should be on the avis d’imposition that you received last year, based on your 2017 income declared in 2018. You can also find it in your personal space on the tax website under Gérer mon prélèvement à la source, as well as on your French payslips and pension bulletins.

How will the tax service deal with it if I am found to have paid too much or not enough after I have made my declaration?

If there is more to pay, it will be payable in one go in September, if it is less than €300, or otherwise over the last four months of the year.  If you have paid too much, you will be reimbursed by September.

How does PAS work for couples?

Normally there is a single rate, based on the overall household income, but there is an option for individual rates (most useful where people have very different levels of salary). You would have had to take up this option last year for it to apply in 2019.

What about micro-entrepreneurs? Is their tax changing?

If you used to pay income tax monthly or quarterly under the libératoire system you can maintain this.
However, if you did not and just declared your income annually, then you will have monthly instalments taken out of your bank account under PAS. If your income varies drastically during the year, it is possible to modify the rate applied, based on  the new income level, by clicking Actualiser suite à une hausse ou une baisse de vos revenus in your personal space on the tax website.

What about property incomes?

Amounts will be taken out of your bank account monthly, based on your 2018 (2017 income) declarations. As with micro-entrepreneurs, there is an option to modify the rate if incomes change drastically (or to stop the levies if the income ceases).

What happens if my personal situation changes (due to the birth of a child or a marriage)?

You should declare this on the website. A change to the rate, if applicable, will be made within two or three months. Similarly, the rate may change if a person changes job, but the employer should deal with this.

I live in the UK but will be renting out a property in France. Will I be concerned with PAS?

Yes, non-residents are included for regular French incomes such as from renting out a French property. In 2019, people who declared rental income as non-residents in spring 2018 (for 2017 incomes) will have monthly instalments taken out of their bank account.

The amounts are calculated at a rate based on your previous declaration and the bank account must be in France or the SEPA (Single Euro Payments Area) zone. The UK may leave this after Brexit, depending on any future agreements with the EU.  Incomes that already have tax taken at source, such as from a French pension, are not included.

How does it work for income tax credits and reductions?

Income tax credits and reductions continue to be taken into account but in this case there is a one-year gap.

If you have recurring expenses that usually entitled you to credits or reductions – such as paying a cleaner or gardener to work at your home, childcare, gifts to good causes, certain tax breaks for renting out property – you should have had a 60% payment of any money owing to you related to this into your account in January. It was based on your declaration last year of incomes /expenses in 2017.

The rest is due in July after your declaration this year of 2018 income. Note, however, that if you did not have such expenses in 2018, you may be due to pay back money received in January.

This system does not apply to tax credits for eco-friendly work in the home. If you have any money owing due to such work in 2018, it will be paid in summer this year. The same applies for other kinds of tax reduction if you incurred the expense related to them for the first time last year.

I work in someone’s home as a nanny – how will tax be taken off?

People in this situation will pay estimated instalments of their 2019 income tax over the last four months of this year (based on 2018 income declared in May/June 2019).

PAS will start for them in 2020 (and there may be some readjustments of the 2019 tax once employees have made their 2019 income tax declarations in 2020).

During 2019, the websites for the Cesu and Pajemploi schemes will allow people who employ in the home to set up an automatic arrangement so the employee receives their pay minus appropriate tax from 2020.

This relates only to where someone is directly employed in the home, not where they work for a firm or association in a person’s home.

I have income from abroad. How will that be dealt with?

If you have regular incomes such as foreign pensions (state, private or government) or foreign letting income, then this will be subject to estimated direct debits on your bank account based on your 2018 declaration (2017 income).

I have a pension that is taxed in the UK and then sent to me in France – is it going to be taxed again?

If you have a UK state or private pension, that should be taxable only in France, so you need to check with the UK tax authorities and your pension provider that you are being taxed correctly. If you have a UK government pension, this should continue to be taxed only in the UK. It will still be “taken into account” for your French tax rate calculation to stop you benefiting from two sets of personal allowances.

I have both French and British state pensions. Can you advise how to deal with the latter, given that its value is affected by exchange rate fluctuations?

The UK state pension income (as opposed to a government pension, such as for a civil servant or teacher) will be subject to PAS instalments once it is known to the tax authorities.

If you think that your pension income in euros has severely dropped due to a fall in the exchange rate, so there would be a substantial difference in your amount of tax payable, you can ask to modify the rate being applied, by going into your personal space on the tax site.

Before validating the request, it will allow you to put in the amount of the income and obtain a simulation of what (if any) difference the change would make to the rate being applied for the calculation of your instalments.

How can I get more information on PAS?

If you have an issue regarding your personal tax situation and PAS, there is a new helpline (French only), at the price of a French landline call, on 0 809 401 401. Non-residents are also advised to use this number, rather than contacting the non-residents’ tax centre. The Finance Ministry has also been responding to questions at facebook.com/Economie.Gouv.

Reader's query answered by Hugh MacDonald
The Connexion welcomes queries and regularly publishes a selection with answers. However, please note that we cannot enter into individual correspondence on money topics. Queries may be edited for length and style. Due to the sensitive nature of topics we do not publish full names or addresses on these pages. Send your financial query to news@connexionfrance.com

Get news, views and information from France
You have 2 free subscriber articles left
Subscribe now to read unlimited articles and exclusive content
Already a subscriber? Log in now