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News about the withholding tax system in France

News about the withholding tax system in France

We published during June 2018 an article on the Withholding Tax System (in French “Prélèvement à la source” or P.A.S.) in anticipation of its implementation in January 1st  2019.

This process is now being implemented, and many details have been provided by the administration since our last publication.

We will therefore briefly remind you of the basic principles of “P.A.S.” (which have not been changed since our last article) and we will then present the main news coming for most of them from comments of the administration.

I – Reminder of the main principles of “P.A.S.”

It is a method of collecting income tax by which the tax of the year is levied monthly or quarterly on income during this same year.

The “P.A.S.” has been in operation since January 1st 2019 and applies as follows:

  • Employees: the employer levies the tax at the time of the payment of the salary according to a rate indicated by the administration,
  • Self-employed workers, farmers and properties incomes holders: These persons pay monthly or quarterly an installment calculated by the administration,
  • Retirees and holders of movable income: the deduction is made by the paying agency.


To better understand how the “P.A.S.” works for both the taxpayer and the tax collector, see our article on our website entitled:
French transition to the “Pay As You Earn” Withholding Tax System

II – Recent measures and administrative commentary on “P.A.S.”

1. C.I.M.R (Crédit d’Impôt Modernisation du Recouvrement)

In order to avoid double taxation the year of commissioning the P.A.S. (year 2019), a tax credit is planned on the incomes of the year 2018, called C.I.M.R.

C.I.M.R. calculation: The amount of the 2018 income tax is multiplied by the following ratio:

Net amount of non-exceptional income (deficits are retained for a nil value)
Total taxable income excluding deficits, charges and abatements

The amount thus obtained is reduced by the tax credits provided for in the international tax treaties.

The administration has published a long commentary on revenues considered exceptional (actualités BOFIP du 4 Juillet 2018). This concerns wages and pensions, the incomes of self-employed workers and company managers

We do not publish this comment here but we are at your disposal to explain or interpret it.

2. Tax reductions and tax credits

In support of the P.A.S, 60% of tax credits are paid by the state to taxpayers on January 15th.

These are tax credits and tax reductions related to:

  • Employment of an employee at home,
  • Childcare expenses,
  • Residence expenses at a facility for dependents,
  • Tax reductions for rental investments.


The 2019 payment is calculated on the basis of the expenditures declared in 2017 by the taxpayers. An adjustment will be made at the time of the liquidation of the 2018 tax (August or September 2019).

3. Employment of an employee at home

Individual employers are exempt from applying the P.A.S. on the salaries of their home-based employees throughout the year 2019.

These employees will pay in September 2019 an advance on their income taxes of 2019. A regularization will then be carried out in 2020 when their tax return will be exploited by the administration.

4. Variation of income or change of situation

The administration calculates for each tax household the rate of withholding tax applicable in 2019 on the basis of the income of the year 2017. This rate will be updated in September on the basis of 2018 revenues.

Couples can opt for a different rate for each spouse based on their own income.

Taxpayers may also ask to change rates during the year in the following cases:

  • Change of family situation (divorce, death of the spouse, birth of a child),
  • Change of professional situation (new activity, cessation or reduction of activity, return to France after a long stay abroad).


This change can be made by the taxpayer himself from his own space on the website “impots.gouv.fr”.

However, it should be noted that a request for an excessive rate reduction (if the amount of the deduction proves to be more than 10% lower than that which should have been applied) will result in penalties.

P.A.S. is a new tax collection process in France that will probably cause many problems and a lot of questions during 2019 year. In addition, the complexity has increased this year due to the end of the one-year delay in the collection of income tax.

Do not hesitate to contact us, we will strive to solve the difficulties you may encounter.

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