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Since the 1st of January 2019, French income tax is levied directly on income at the time it is received. Deduction at source does not affect the methods of calculation, but new recovery methods are introduced. The deduction at source is mandatory and also impacts foreign employers.

For French tax-residents, distinction should be made between:

  • Foreign-source income (received in return for work carried outside of France) paid by a foreign employer will remain subject to the current advance payment system unless otherwise provided for by a tax treaty;
  • French-source income (paid in return for work carried in France) to a tax-resident in France will be subject to the new direct withholding tax system, this whether the income is paid by an employer established in France or abroad.

Income subject to withholding tax and companies concerned :

Income received by employees of a Swiss company, seconded to carry out their activity in France where they are tax resident, is subject to withholding tax in France as from 1st January.

On the contrary, income from foreign sources (received in return for an activity carried outside of France) paid by a non-French employer is not concerned and remain subject to the previous advance payment system.

New constraints for foreign employers and legal obligation to appoint a representative in France :

Where the debtor of the withholding tax is not established in France, he is required, subject to few exceptions, to appoint a representative established in France accredited by the French competent tax authorities. Such representative undertakes to complete the formalities on behalf of the employer, and, where applicable, to remit the withholding taxes to the tax authorities.

Only debtor companies established within the EU or the EEA can be exempted from appointing a representative in France. This is not the case for companies based in Switzerland, which are therefore required to appoint a representative in France.

The representative must be a company established in France (company belonging to the same Group or a third party, or even a trustee or an accounting firm subject to prior accreditation from competent tax authorities).

Withholding tax and reporting procedures:

Among the persons required to carry out the withholding tax, a distinction must be made between:

  • collectors required to subscribe to the DSN (Déclaration Sociale Nominative): These are employers whose employees are subject to the general social security scheme in France who pay income subject to withholding tax.
  • collectors required to submit the PASRAU declaration: This is for persons or income items who do not fall within the scope of the DSN. This applies in particular to employees of foreign employers seconded to France with no French social security number.

Foreign employers whose employees are not covered by the general social security scheme in France and are thus in principle required to subscribe to the PASRAU declaration according to the official rules published.

Some companies, not familiar with the PASRAU declaration, have tried to find an alternative by carrying out their procedure relating to withholding tax via the DSN of a sister company based in France. This alternative would make it possible to include employees seconded to France (subject to withholding tax) on the DSN of a sister company (the host company in France subject to the DSN for its own employees) through a specific vehicle of the DSN provided for external employees.

However, the use of the DSN raises in practice some technical issues since it requires in principle for employees to have a French social security number (which is not the case for seconded employees) and is therefore difficult to implement even by requesting a Temporary Technical Number (NTT).

In addition to these technical difficulties induced by the use of the DSN, such a process is not expressly provided for in French tax legislation for foreign employers and their seconded employees in France for which the declaration should be done exclusively through the PASRAU system which is more adapted to seconded employees. The use of the DSN by foreign employers should therefore not be enforceable against the administration unless the company obtains a prior ruling from the French competent tax authorities. In this context, unless a ruling has been obtained, it would be recommended to use the PASRAU system, which is the only one currently recognized by French law.

What foreign companies should do to comply with French withholding tax obligations:

  • Ask for a SIRET number (If you do not already have one), it is necessary to create a professional space on French government income tax website, declare and transfer the withholding tax on the Net-entreprises website. In order to have such SIRET number, you must first register by completing the specific EE0 form, reviewed for this purpose, to be sent to the French competent tax authorities (SIEE – Service des Impôts des Entreprises Etrangères);
  • Create a professional account directly on French government income tax website;
  • Ensure that the company has a bank account allowing SEPA payments (Single Euros Payment Area) in compliance with French Tax authorities requirements;
  • Appoint a tax representative, when required, who will be responsible for all formalities in the name and on behalf of the foreign employer.

The foreign employer or its tax representative, where required, must then:

  • Complete online declarations on the website of Net-entreprises,
  • Calculate and carry out the withholding tax on salaries to be paid to the competent French tax authorities, using either reference tax rate by default or a previously requested adjusted personal tax rate (using a specific form: 2043 SD Cerfa).

The foreign employer remains the debtor of the withholding tax; however, the tax representative will have to undertake all the required tax declaration and organize any related payment on behalf of the foreign employer according to his mandate.

Mandatory payslip Items:

The French Labour Code (article R. 3243-1 amended by decree of 7 December 2017) states the minimum provisions that are required from a French employer on the payslip related to withholding tax including: the gross income subject to withholding tax at source, the personal income tax rate, the deducted amount of the withholding tax, as well as the amount that would have been paid to the employee in the absence of withholding tax.

It should be noted that these statements do not appear among the list of mandatory mentions required on pay slips from foreign employers for employees seconded to France (Article R.1263-1 of the French Labour Code applicable for secondment beyond 1 month). Even if there is no legal requirements related to withholding tax on payslip, in practice payslip should at least mention the amount withheld for tax purposes.

For further information


Emilie Rulland

Chief International Mobility Consulting Officer

Direct line: +41 22 309 35 61

The information enclosed within the present newsletter are not exhaustive and do not cover necessarily all legal aspect of the subject. This in no case can replace a legal professional advice particularly regarding the considered case under any particular situation. Copyrights are reserved, except with prior written consent.