What is the ‘flat tax’?
The aim in creating this was to provide greater transparency so investors can anticipate the tax effects on eventual investment income
This is a kind of income tax that may be applied to income from capital-based sources, namely bank interest, dividends and capital gains on the sales of shares, as well as gains such as from an assurance vie or a Plan Épargne Logement savings plan.
The flat tax – officially Prélèvement Forfaitaire Unique (PFU) – consists of 12.8% of income tax plus social charges, which are usually 17.2% unless you qualify for the lower 7.5% rate – see chapter 6. Note that the social charges have risen to a standard 18.6% in the 2026 social security finance law, affecting some kinds of income starting from declarations of 2025 income (see chapter 1, 'What is new in 2026').
The Macron government’s aim in creating this was to provide greater transparency and simplicity so the investor can anticipate the tax effects on their eventual investment income.
This was in hopes that it would lead to more capital being invested in France.
In many, but not all, cases the PFU will be more favourable than the tax bands.
Taxpayers can, however, choose the ordinary income tax bands system should this result in a more favourable taxation on the household’s investment income than the flat rate tax. The same rate of social charges – 17.2% (or 7.5% if eligible) will apply under either option.
In many cases the only way to be sure which will give the best outcome is to simulate the household’s tax results under both options.
If declaring online, the system should automatically show you if the option for the bands would be more favourable, should you not have selected it.
If the progressive bands system is chosen then this will exclude the flat tax altogether, meaning you cannot choose the flat tax for some items of investment income and the bands for others.
Elements which can make the progressive bands more favourable include the fact that 6.8% of social charges can be tax deductible, dividends benefit from a 40% allowance and that certain allowances are applied for length of ownership with regard to capital gains on shares bought before 2018.