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‘At source’ tax to go ahead including foreign income

‘At source’ taxation WILL go ahead from January 1 2019, as planned, the government says – and those with certain incomes from abroad are also now expected to be affected as well as those with incomes from sources in France.

It comes after doubts had been  raised over whether or not the planned move to a prélèvement à la source (PAS) tax system, which have already been delayed a year, would be delayed again – or even cancelled.

Newspaper Le Parisien had claimed seeing a Finance Ministry report which revealed that trials had shown the new systems to be full of technical bugs. The paper quoted a ‘high official’ saying that going ahead in January would be like “playing Russian roulette”.

President Macron demanded clarifications from the Public Accounts Minister Gérald Darmanin, who met with him and Prime Minister Edouard Philippe, however they have now confirmed that the changes will go ahead.

Mr Philippe said on TF1 television news that while the changes would be “technically complex”, “we have the guarantee, the certainty and the conviction that this reform will be put in place in a good condition”.

He added the president was being “exacting” but was not “hesitating” about the reform.

The way certain kinds of income will be dealt with under the PAS system has been subject to various modifications and clarifications – for example, see page 36 for the latest information for small businesses and those who employ help at home.

It has also been announced that those who have previously benefited from tax credits such as for paying people for services in the home or donations to charity will now get a 60% advance on January 15, based on the credit obtained in the previous year (this was previously announced as 30%). There will then be a readjustment (with a balancing payment if appropriate) in summer 2019.

Those who normally pay French tax should by now have received their avis d’imposition statements for their declarations of 2017’s income, which will include on them the rates which are expected to be used for any ‘at source’ tax payments next year. These will be transmitted to employers and pension bodies for those with French jobs and pensions.

From January, ‘at source’ tax will be taken off where appropriate. There will be no tax on 2018 incomes (at least not on ones that you ‘habitually’ receive, as opposed to any exceptional, one-off sums), so that people are not having to pay double amounts of tax in 2019.

Self-employed people and those with property incomes will pay instalments by direct debit from their bank accounts that will be based on 2017’s income in the first part of the year and then based on 2018 income from September.

These will be paid on a monthly basis by the 15th of each month, or every three-months for those who have notified their tax office of their preference for this. Régula­risation adjustments (extra charges or refunds) will be applied in August or September 2019.

When it comes to incomes from abroad, the government says it is not concerned if they are those that are subject to a tax credit for French tax, eg. ‘government’ pensions (for retired teachers, civil servants etc) and UK rental and letting income. However, other kinds of regular income from abroad are to be subject to instalments, as described above for French self-employment and property incomes. This could include, for example, foreign pensions or the salaries of frontier workers who live in France and work abroad.

Non-residents are concerned by PAS if they have regular French source incomes such as from French work, pensions or rental income.

Note that according to the Fédération des Auto-Entre­preneurs, those micro-entrepreneurs who already pay income tax on a system of regular (monthly or three-monthly) payments during the year are not concerned by PAS, as they already pay their income tax ‘in real time’.

To help those seeking information about the new system a helpline has been put in place (in French) on 08 11 36 83 68 and this line will be free from January. At present it is six centimes a minute (plus the usual cost of a local call, if applicable).

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