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New withholding tax system for mobile employees in France

The implementation of withholding tax (WHT) as from 2019, will make it mandatory for employers to withhold tax on a monthly basis from French income.

Although this new system will mainly impact employers established in France, it may also concern those established outside France but with employees exercising their duties in the country.

The situation of internationally-mobile employees raises specific questions regarding the transition to the new withholding tax system. French and international businesses should anticipate the changes by implementing adequate procedures before the end of the year. Key elements of this change are highlighted in this article, to find out more, please contact our member firm in France.

Withholding tax liability

Liability for WHT falls to the business paying the income. It is therefore not necessarily the legal employer but the debtor of amounts that is liable. It’s important to check the place of establishment of the entity paying the salary for a group of companies as this impacts on filing obligations.

What is in the withholding tax scope?

Are salaries paid or activities carried out internationally within the French withholding tax scope? This depends on the employee’s tax residence, where the activity is carried out and where the employer (in the sense of debtor) is established.

Tax residents outside of France

If the employee is not a tax resident in France and they receive a remuneration paid by a debtor established in France or internationally in consideration for an activity carried out in France, the salary paid is in principle taxable in France, subject to the rules provided by tax treaties. In this case, the salary is not subject to WHT, but to the quarterly withholding regime specifically provided for non-resident employees.

Tax resident in France

If the employee is carrying out their activity in France, the employer established in France or internationally will withhold tax from the salaries.

There is no WHT if the salary is paid by a debtor established outside of France for an activity carried out internationally but is taxable in France by virtue of domestic law or applicable tax treaties (eg in the case of cross-border workers whose salary is taxable in the country of residence and not in the country where the activity is carried out). In this case the employee shall pay monthly instalments that are directly withdrawn from his bank account by their tax office. The employer is under no circumstance liable for tax in this situation.

If the salary is paid by an employer established in France for an activity carried out internationally and if the remuneration remains taxable in France by virtue of domestic law or applicable tax treaties (eg a secondment of less than 183 days during a period of 12 months in the UK) then tax is withheld by the employer.

To make sure that the tax is withheld correctly when there is at least one international element, it’s necessary to carefully check:

  • the location of the debtor of the remuneration
  • the employee’s tax residence
  • the place where the salary is taxable according to domestic law and rules laid down by the tax treaty that may be applicable.

International salaries: The basis of the withholding

For salaries falling within the scope of the WHT, the basis is constituted by the net taxable amount, that is the gross amount less the deductible social security contributions and the deductible general social contribution (CSG) borne by the employee. The actual or flat-rate (10%-deduction of net taxable salary) amount of business expenses is not deductible.

Subject to certain specificities requiring recalculations, the determination of the net taxable salary subject to WHT does not present any specific issue for a salary paid in France subject to French social contributions since payslips already show this amount.

The determination of net taxable salary is more complicated for salaries paid internationally and taxable in France. In this situation, it’s necessary to recalculate the international remuneration on a monthly basis in order to calculate the amount to be withheld.

The recalculation notably implies determining international social contributions that are deductible according to French law (when the employee remains subject to social contributions in their country of origin) or to assess the benefits in kind according to French rules.

Also, international employees working in France in terms of an intra-group secondment often benefit from a favourable regime exempting them from income tax on a portion of their remuneration. The withholding tax does not apply to this portion.

Businesses concerned should consider implementing a system allowing them to efficiently recalculate international remuneration every month.

Designation of a tax representative

Debtors established outside of France are obliged to designate a tax representative that is responsible for submitting returns and paying withholding tax to the tax administration (as well as the payment of penalties in case of mistakes or delays in payment). Employers established in the European Union, Iceland or in Norway are exempted from the obligation to designate a representative.

The conditions for designation as a tax representative are flexible. The debtor has full discretion in the choice of its representative if it’s established in France and presents ‘unquestionable fiscal honesty’, based on its timely compliance with its fiscal declaratory and payment obligations over the last 12 months as from the accreditation request.

The representative may thus be an external service provider or a business with which the debtor is related. Therefore, if the debtor is not established in France, it may designate its subsidiary, branch or a permanent establishment located in France.

If the debtor already has a tax representative notably for VAT purposes, it shall designate it for the WHT.

The request shall be made in writing to the tax office of international businesses. The accreditation shall be obtained prior to the tax being withheld.

International companies paying salaries to their employees who became French tax residents, who are taxable in France, shall consider the person that they will designate as their representative and send an accreditation request without delay. The representative, especially if it’s a French subsidiary of a international company shall be prepared for this function.

Registration obligation of international employers

International employers, without a French permanent establishment, that have French tax resident employees working in France must obtain a registration number (called a SIRET) in order to:

  • Register on the website Net-entreprises to send the required returns (see below) and pay the withholding tax.
  • Create a professional account on the website to consult the returns sent and the payments made and also to provide the bank details of the account on which the tax will be debited. 

The international employer should also have a bank account in the SEPA zone.

Declarations to be made

WHT is in principle made via the nominative social declaration (DSN). However, it’s not always possible to use this declaration. For example, when the remuneration of international employees carrying out their functions in France remains subject to social contributions in their country of origin.

In this situation, a specific declaration called a ‘withholding tax of other income’ (PASRAU) shall be made and an online return shall be submitted by the 10th day of each month (via the online portal

The two types of returns are not mutually exclusive.

An employer established outside France shall submit a DSN for its employees sent to France and whose salaries are subject to French social contributions and a PASRAU return for those that remain subject to social contributions of the country of origin.

Determination of the applicable rate for employees

Newly resident in France

The employer shall apply the ‘specific rate’ to each employee to calculate the amount of tax to be withheld from the remuneration. This rate, communicated directly by the tax administration via a report (issued as a response to each DSN or PASRAU), is calculated according to the latest income tax return made by the employee.

If this rate is not communicated by the administration, the employer shall then apply a proportional rate determined according to a scale that takes into account the amount and the frequency of remuneration (provided for in section 204 H of the General Tax Code). This proportional rate is called the ‘default rate’.

The employer shall apply the default rate for all new international employees that carry out their duties in France since the latter would, in this case, never have submitted an income tax return.

Married taxpayers

The application of the default rate may have unfavourable circumstances for married employees and/or employees with dependants. as the rate is based on the situation of a single taxpayer.

In order to avoid this inconvenience, it is possible for the employee (but not the employer) to get in touch with the administration in order to obtain a rate based on their situation and income for the current year. The administration expressly refers to the situation of persons settling in France.

The employee is responsible for communicating their situation and the estimate of the entire income that they will receive or achieve in the current year. In response, the administration will calculate the specific rate and communicate it to the employer via the report.

It may therefore be useful to inform employees about this possibility and to be able to provide them with an estimate of their salaries for the current year so that they can make this request. The employer may have an indirect interest in his employee making this request when his remuneration is subject to tax equalization for example (the employer covers the French tax payable for the portion exceeding the tax that the employee would have paid if he had stayed in his country of origin).

This request shall be made as soon as possible since the specific rate applies for the future and does not involve any adjustment of prior periods. It’s in the interest of any international businesses to start their formalities now in order to avoid any delay that would result in penalties.


In the absence of a return made by the employer or the late submission of the withholding tax return, a 10% penalty applies on the basis of the tax withheld that should have been declared. In case of miscalculation of the tax or omission or in case of use of an incorrect WHT rate, a 5% penalty is applied on the amount of tax withheld that was not declared. Where an insufficient payment or the absence of payment on the due date, an increase of 5% shall be applied on amounts payable.