France

Employment income

Unless expressly excluded by a tax treaty as subject to tax in another country or by domestic law, employment income earned in France and abroad by a resident is subject to French income tax, regardless of where payment is made and whether it is remitted.

Employment income is widely defined and includes all employment benefits provided by the employer whether in cash or in kind. Social security and pension contributions made to French and qualified foreign plans are tax deductible. Business expense reimbursements are not taxable.

Benefits-in-kind are, as a general rule, included in income at market value. The following are exceptions:

• Reimbursements of travel costs incurred by an employee exclusively for business purposes and furniture removal expenses are generally both fully non-taxable.
• A cash lump sum provided by an employer to compensate the employee for housing costs is assessed in full for income tax purposes, although housing (rented or owned by the employer) provided to the employee is subject to special rules. In this case, the taxable benefit is assessed, not at the actual cost of the rent, but at the fixed rates provided by the French social administration (depending on the level of remuneration as well as the number of rooms) or, upon election by the employer, at the rental value used by the tax authorities to levy local taxes. In order to qualify, the expatriate must not be a managing director/corporate officer of the company owning or renting the dwelling.
• Impatriate allowance may be fully exempt from Personnel Income Tax (PIT) according to the special inbound tax regime. See the Taxes on personal income section. 

Non-residents liable to PIT on employment income are subject to withholding tax (WHT). After deducting mandatory employee social security contributions and the standard 10% salary deduction, employment income is subject to WHT at source by the employer at the rates of 0%, 12%, and 20%. The 12% WHT is a final non-refundable tax. Non-residents are, nevertheless, liable to PIT (resident rates) on the portion of remuneration subject to the 20% band. For non-residents, the minimum rate of tax applicable to net annual income up to a limit of EUR 29,579 (for 2025) is 20% and 30% for the fraction above this limit (limit for income from France mainland). Therefore, the annual tax may be higher than the 20% WHT; in such a case, the 20% WHT levied by the employer is offset, but an additional income tax is due by the employee. If the annual tax is lower, the total WHT tax is the final tax liability of the employee. Under certain conditions and in limited cases, refunds of WHT can be claimed.

Equity compensation

There is a specific tax regime in France applicable to stock options and free shares gains that depends notably on the date of grant of the stock options or of the free shares and on whether or not the plan is ’qualified’ (under provision of the French Commercial Code).

For 'non-qualified' plans, the acquisition gain is taxed the year the options are exercised (for stock options) or the shares are vested (or put at the employee's disposal if different from the vesting date) for free shares. The acquisition gain is taxable according to progressive tax rates.

For 'qualfied' plans, the taxation of the acquisition gain occurs the year of the sale of the shares. Depending on the date of the grant of the stock options or free shares, the relative acquisition gain may be taxed according to progressive tax rates or flat tax rates. In addition, the acquisition gain is subject to social surtaxes and may be subject to social tax.

The capital gain, if any, should be in principle taxed at the flat tax rate of 31.4%. See Capital gains tax in the Other taxes section and Disposal gain in Management packages for more information.

Both the acquisition gain and capital gain may be subject to the exceptional surtax on high income (contribution exceptionnelle sur les hauts revenus [CEHR]) and differential contribution on high incomes (contribution différentielle sur les hauts revenus [CDHR]), if applicable.

Considering the complexity of taxation of the stock options and free shares gain in France, specific advice from a tax advisor is required.

Disposal gain in Management packages

A new statutory tax and social regime have been introduced in 2025, applicable to gains realised as from 15 February 2025 derived from the disposal of securities subscribed or granted to employees/corporate officers in consideration for their professional duties within the issuing company or a group company of the issuing company (the ‘Specific MIP Regime’). 

Based on the draft guidelines, gains are deemed realised by employees/corporate officers ‘in consideration for their professional duties’ where the following economic or contractual hallmarks are met in relation to the managers' investment:

• Economic hallmarks: at exit, the value of the instruments held by French managers is conditional on the achievement of performance thresholds (e.g. IRR/MMx) by either the issuing entity and/or other investors, irrespective of the nature of instruments held by French managers (e.g. ordinary shares, preferred shares or free preferred shares) or the legal features of the MIP (e.g. ratchet return or sweet equity).
• Contractual hallmarks: This includes put and call options in case of termination of the employees/corporate officer functions (leaver provisions) or in case of a breach of any contractual agreement by the manager, drag along and tag along clauses, lock-up clause, non-compete and loyalty-exclusivity clauses.

If the gain upon disposal does not fall within the Specific MIP Regime, the gain would be subject to 31.4% (i.e., 12.8% income tax and 18.6% social surtaxes + 3% -4% high earners’ surtax).

If the gain upon disposal does fall within the Specific MIP Regime, and depending on whether two criteria set by the Specific MIP Regime are fulfilled, the tax and social security treatment applicable to those gains should be as follows:

• Scenario 1: fulfilment of two criteria set by the Specific MIP Regime:

Provided that i) there is a risk of capital loss for the employee or corporate officer and ii) the individual shareholder holds the shares for at least 2 years (except for shares acquired through French regulated plans - free shares, stock-options, BSPCEs), the gains derived from the disposal of securities within the scope of the new MIP regime are subject to capital gain tax (31.4% flat tax + exceptional surtaxes on high income, if any) up to a performance multiple equal to 3 times the financial performance of the issuing entity during the employee's investment.

The portion of the gain exceeding this capital gain ceiling (3x the financial performance of the issuing entity), if any, is taxable as employment income (progressive income tax rates up to 45%) + 10% specific employee social contribution + exceptional surtaxes on high income, if any.

• Scenario 2: non-fulfilment of two criteria set by the Specific MIP Regime:

Gains realised by employees/corporate officers upon the disposal of securities subscribed or granted in consideration for their professional duties within the issuing company or a group company of the issuing company which do not comply with the 2 criteria set by the new MIP regime (minimum 2-year holding period - for paid in securities - and risk of capital loss), would be classified as employment income within the scope of French ordinary employee and employer social security contributions.

Business income

Profits or gains derived from trades, professions, or vocations carried out in France are subject to tax regardless of whether the individual is resident of France. If the individual is resident in France, a liability may also arise on profits or gains on activities carried out abroad unless tax treaties provided otherwise.

Capital gains

Capital gains are generally subject to the flat tax rate. See Capital gains tax in the Other taxes section for more information.

Dividend income

Generally, a French resident is liable to French income tax on investment income, whether from French or foreign sources. Dividend income earned as from 2026 is subject to a flat rate tax (prélèvement forfaitaire unique [PFU], sometimes referred to as the 'flat tax') set at 30%, including income tax at 12.8% and social surtaxes at 18.6%.

Upon receipt of the dividends, French tax residents are subject to a compulsory withholding tax (WHT) as a type of instalment payment against the final tax (self-assessment/return to be prepared in certain situation).

Taxpayers may opt to tax all of the income subject to the PFU at the progressive income tax rates if more beneficial. In this case, the 40% reduction previously applicable to dividends remains applicable. It should be noted that this option is applicable to all of the income subject to the PFU without a possibility of a partial option.

The CEHR and CDHR, if any, are applicable in addition to the 31.4% PFU.

Interest income

Generally, a French resident is liable to French income tax on interest income, whether from French or foreign sources. Taxable interests earned as from 2026 are subject to a flat rate tax (PFU, sometimes referred to as the 'flat tax') set at 31.4%, including income tax at 12.8% and social surtaxes at 18.6%.

Upon receipt of the interests, French tax residents are subject to a compulsory WHT as a type of instalment payment against the final tax (self-assessment/return to be prepared in certain situation).

Taxpayers may opt to tax all of the income subject to the PFU at the progressive income tax rates if more beneficial. It should be noted that this option is applicable to all of the income subject to the PFU without a possibility of a partial option.

The CEHR and CDHR, if any, are applicable in addition to the 31.4% PFU.

Rental income

Rental income (for unfurnished properties) is taxed as ordinary income after deducting actual expenses borne by the landlord, such as mortgage loan interest, management expenses, repairs, property taxes, and insurance expenses. However, no actual depreciation cost will be taken into account (except for specific investments).

Nevertheless, when the tax household receives annual rental income (not relating to specific type of investments) lower than EUR 15,000, the gross income may be directly reported on the tax return and is taxed after deduction of a fixed allowance of 30% corresponding to expenses.

Alternatively, the tax household may opt for the determination of net rental income taking into account the actual expenses paid (instead of the 30% flat rate deduction). This election is made through the filing of the annual PIT return and cannot be revoked for a three-year period.

Rental losses (generally due to repairs), except for interest on loans, are creditable against other income up to a limit of EUR 10,700 per year. Depending on the nature of the property, rental losses exceeding this limit are creditable against rental income only and can be carried forward for ten years following the year in which the loss is incurred.

The 2026 Finance Law creates the tax status of the private landlord, also referred to as the ‘Jeanbrun scheme’ or the ‘Relance Logement’ mechanism. This regime allows individuals who acquire, before the end of 2028, residential properties intended for unfurnished rental as the tenant’s principal residence to deduct from their rental income a depreciation charge of up to 80% of the property’s acquisition cost, subject to certain conditions. The depreciation rate, which varies between 3% and 5.5%, depends on the characteristics of the property (new or rehabilitated existing housing).

Inbound assignee regime (Article 155 B of the French Tax Code)

Inbound assignees who actually benefit from the inbound regime can exempt 50% of the amount of the following income, under certain conditions, that mainly relates to the geographic situation of the paying entity:

• Foreign-source interest and dividends.
• Foreign-source royalties.
• Foreign-source capital gains.
• Foreign-source industrial and intellectual property (IP) gains.

For more details on the social surcharges and their applicability to capital gains and investment income, see the Taxes on personal income section.