Withholding income tax: prélèvement à la source (PAS/PAYE)

So much has been written, argued and exaggerated about France’s new tax system, Prélèvement à la Source (PAS/PAYE), that it was an excellent opportunity for ABIE to hold a breakfast seminar on the subject on Thursday, 14 February.

Hosted by ABIE corporate member Calinaud David Avocats, fellow ABIE member Thomas Bidou, a French payroll expert, made a clear and precise presentation of the new tax rules.

“What will change,” said Thomas, “is the mode of payment.

“What will not change is the method of calculating the income tax, and the obligation to file a tax return.”

After providing an overview of the new tax framework, he explained that employees will not need to give any information about their tax situation to their employers.

However, if there is a change in circumstances that impact on an employee’s tax rate (such as a birth, a death of a spouse, divorce, or a substantial change in income), the taxpayer must to contact the administration directly, through the web site impots.gouv.fr, to adjust their tax rate.

These changes must be reported within 60 days. Such a change will be taken into account within two months.

“The question most asked,” said Thomas, “is ‘Am I going to pay more tax?’. The answer is no! For employees and retirees who earn a monthly income, the tax will now be spread over 12 months, and not 10 as previously.”

For the employer, there are two responsibilities: To apply the tax rate provided by authorities, and to pay withholding tax. This rate is provided in an electronic format and cannot be adjusted, even if the employee claims it is incorrect.

The payment must be made by direct debit with a B2 SEPA mandate, which means having a European bank account.

The appreciative audience gave Thomas a warm round of applause for the clarity and precision of his presentation. It is now for all taxpayers to experience PAS in action.