An Upcoming Revolution in France?


With the U.S. presidential and Brexit votes surprising those who expected the status quo to remain unchallenged, many are looking at France’s upcoming elections in the spring of 2017 to be the next vote that could result in political upheaval. Polls show that Marine Le Pen, president of the nationalist National Front party, is expected to make it to the second round of the presidential vote for a runoff election.

Yet as much as Le Pen’s win would be a dramatic rejection of the usual state of French politics, the world of French payroll already is undergoing a momentous transformation in its own right.

Two distinct yet related changes are at the heart of this change: the adoption of an online method for social welfare data reporting, called déclaration sociale nominative (DSN), and the start of employer income tax withholding in 2018.

Until the introduction of DSN started to phase in in 2013, payroll professionals working in France had to report payroll data and submit social contributions to multiple social welfare agencies with separate forms, often in various formats, with a range of deadlines.

DSN allows companies to electronically file payroll data and make social security contributions in a way that would consolidate about 20 existing payroll reporting obligations into one system and eliminate the former year-end filing process.

Under the program's current design, employers submit their DSN data through a single portal, The national bank for French Social Security controls DSN data and sends the data to relevant public agencies, while the national pension fund stores the data.

The new system does not, however, combine all companies’ administrative declarations as companies will still have to separately report within strict time limits such events as hiring, termination, accidents, leave periods for maternity and illness and returns from leave.

In the works for some time, DSN has been slowly phased in since mid-2013. On Jan. 1, 2017, however, the old system which has been running parallel to DSN is scheduled to be fully eliminated, making DSN the only means available to employers for payroll reporting.

This novel electronic system used for payroll management and social tax compliance likely will  become even more integral for payroll in France on Jan. 1, 2018, when the government is scheduled to start requiring employer income tax withholding using the DSN system.

Introduced in the 2017 Finance Bill, which has yet to receive full legislative approval, income tax withholding would change the long-time practice of a yearlong lag occurring between when income is earned and taxes are paid.

Under the current proposals, employers are expected to receive withholding tax rates in late 2017 and then apply those rates on earnings paid to those subject to tax at the source, deduct amounts from pay and remit amounts to authorities on a tax schedule based on the employer's size. Remittance is expected to be either eight days, 15 days or three months after the payment is made.

France is known for its confusing tax complexities, especially in the realm of employers and payroll reporting. Both developments confront this old system, which has gone unchallenged for many years. It remains to be seen if the challenge to the status quo in payroll will coincide with a rejection of the political status quo.

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