Payroll taxes in France

Who is concerned?

Payroll taxes in France are paid by the following:

• Employers established in France, regardless of the employee’s place of residence or business;
• Employers who are not subject to VAT in the year of payment of remuneration (or subject to less than 90% of turnover in the year before payment of remuneration).

The following are particularly concerned:

• certain liberal professions;
• landowners;
• cooperative, mutual and professional agricultural organizations;
• companies engaged in civil activities: investment companies, real estate companies, except those whose object is the construction of buildings or the trading of goods;
• banking, financial and insurance institutions;
• administrative or social bodies: associations of the 1901 law, non-profit organizations, pension funds, social security organizations, family allowance funds, public hospitals, etc. ;
• health transport companies for their activity not subject to VAT;
• the syndicates of co-owners;
• industrial technical centers;
• help centers through work and sheltered workshops.

Who is exempted?

• Private employers of a home-based employee or a maternal assistant;
• Agricultural employers;
• Higher education institutions;
• Employers whose pre-tax turnover in N-1 does not exceed the limits of the VAT-based franchise (for example, auto-entrepreneurs).

Tax base

The wage tax is based on the gross annual amount of all remuneration and benefits in kind paid by the employer: wages, allowances (including paid leave, dismissal, retirement …) , bonuses, benefits in kind, employee contributions, profit-sharing, participation, employee savings, employer contributions for supplementary pension plans or supplementary retirement benefits …

Are not subject to tax:

• contributions to training insurance funds;
• daily social security allowances;
• partial activity benefits;
• wages paid to apprentices by firms employing not more than 10 employees;
• compensation paid under a support contract in employment or future;
• severance pay;
• the gratuities paid to the trainees within the limit of the deductible of contribution (the share beyond the minimum gratuity is subject to the tax).

In France statutory payroll tax only covers employee and employer contributions to the social security system. Income tax deductions from the payroll are voluntary and may be requested by the employee, otherwise employees are billed 2 mandatory income tax prepayments during the year directly by the tax authority (set at 1/3 of the prior year’s final tax bill). Employee payroll tax is made up of assigned taxes for the three branches of social security system and includes both basic and supplementary coverage. Different percentages apply depending on thresholds that are multiples of the social security earnings ceiling (in 2012 = 36,372 euro per year).

Contributions for salaries between the minimum wage and 1.6 times the minimum wage are eligible to relief (known as Fillon relief) of up to 28 percentage points of employer contributions, effectively halving employer non-wage costs.