French Proposes Use of Payroll System for Income Tax Withholding

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By Rick Mitchell

Aug. 3—The electronic system used for payroll management and social tax compliance also would be used for compliance with the new personal income tax monthly withholding requirements, the French ministries of finance and budget said Aug. 2.

The income tax withholding proposal is to be part of the 2017 Finance Bill and would take effect Jan. 1, 2018, the ministries said.

With income tax withholding to apply to taxpayers' earned income for 2018, employers would be able to use the same system underlying France's new declaration sociale nominative (DSN) system that allows companies to electronically transmit payroll data and comply with social taxes via payroll software programs or through third-party payroll providers or certified accountants, the government said.

The DSN already has allowed employers to consolidate about 20 existing payroll reporting obligations, the government said.

Modernizing Tax Collection

France's income tax collection system creates difficulties for certain taxpayers because of a year-long time lag from when income is earned to when it is taxed, the ministries said.

The new withholding plan would modernize French tax collection by adapting to a person's job changes and life events without changing calculation methods, the ministries said. In particular, the system would allow for taxing income as soon as it is earned, and the DSN system would help with that, the government said.

France has been gradually implementing the system to replace its notoriously onerous reporting requirements for dozens of social welfare, health insurance, pension and other related public and private agencies that collect social welfare taxes.

France's 13,000 largest companies were first required to use the DSN system for reporting social welfare data in May 2015. At least 460,000 smaller companies, totaling more than 13 million employees, implemented the system in advance of a legal requirement, the government said.

To contact the reporter on this story: Rick Mitchell in Paris at

To contact the editor responsible for this story: Michael Trimarchi at

For More Information

The government statement about the planned withholding at source requirements, is available in French at:

Information about the DSN, in French, is at

More information on payroll issues in France is available in the France country primer.

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