Employers and the New French law reform implementing withholdings income tax

Sep 28, 2018

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Starting January 1st, 2019, a new withholding income tax system will come into force for all companies employing employees in France.

Upon this new system, employers will be responsible for holding a predefined rate on employees’ wages corresponding to their income tax, before transferring it to Tax Administration.

The tax rate is calculated by Tax Authorities and communicated to employers in respect of each employee depending a progressive scale.

While this reform transform companies into income tax collectors, it also imposes them a confidentiality obligation on information concerning their employees they shall have knowledge of in course of this new collector role.

Failure to comply with the new obligations could have detrimental consequences, as the law now provides fines up to 10% and 250 euros for each error or omission, besides the 300,000 euros fine in case of breach of the confidentiality requirement.

We recommend employers to build and implement a plan for the introduction of this new system given its impact on normal payroll and tax compliance obligations.

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