France

Recent significant developments impacting the taxation of individuals include the following:

Moving to a withholding tax (WHT) system

Since 1 January 2019, for French resident taxpayers, income taxes are paid on a pay-as-you-earn (PAYE) basis. The scope of income subject to the new WHT system is very wide and covers most categories: employment income, pensions, replacement income, annuities, self-employment income (industrial and commercial, non-commercial, agricultural), and rental income.

Taxation of non-resident of France

The Finance Act Bill for 2019 planned to bring the taxation of non-resident taxpayers closer to those of French tax residents in 2020 by eliminating the WHT at 0%, 12%, and 20% on the non-French tax residents' wages (Article 182 A of the General Tax Code), by implementing the PAYE (PAS), and by removing the partially liberating nature of the WHT. However, amendments as part of the draft Finance Bill for the year 2020 provide for a moratorium of one year of the new taxation system for non-residents. Consequently, the current system remains in place for 2020 and potentially 2021 (to be confirmed).

Inbound tax regime: Extension of the 30% flat exemption for intra-group mobility

The 2019 Finance Act Bill has reinforced the favourable tax regime for 'impatriates' (article 155B of the General Tax Code) by extending the 30% flat rate exemption, which previously was only available to employees directly recruited from abroad, to the net taxable compensation of all employees, regardless of the way they were recruited, including those who are transferred intra-group.

This provision applies to compensation due beginning 1 January 2019 for transfers that occurred from 16 November 2018.