Pay as you earn income tax withholding

Last up dating on Tuesday 01 January 2019

Beginning in January 2019, your TFE center will withhold incometax on a pay-as-you-earn basis on behalf of its members.

Based on the information it has received from the French tax authorities, your center will directly calculate the amount of income tax to be withheld. You will then be notified of the net salary after tax that you will need to pay each employee.

As an employer, URSSAF will charge you for the amount of this withholding (if your employee is liable to income tax) on top of your social security contributions. All administrative documents (pay slips, contribution statements, and tax certificates) will list the amounts of these withholdings.

Special cases

  • How income tax withholdings are calculated for short contracts

Income tax withholdings for employees on short contracts are calculated according to special rules. These rules mainly apply if the contract was drawn up under a specific set of circumstances, is no more than 2 months long, and the employer has not been provided with a withholding rate by the French tax authorities.

If these two requirements are met, a discount amounting to 50% of France’s net monthly taxable minimum wage (“SMIC net imposable mensuel”) will be applied to the employee’s net taxable wage for up to the first 2 months of employment.

However, employees to whom the discount applies must be informed that the net taxable income that they are to declare on their next yearly tax return is the undiscounted net amount.

  • How withholdings on subrogated daily Social Security benefits are calculated

Income tax is withheld on all basic Social Security or supplementary daily benefits (for medical leave, maternity leave, etc.), insofar as said benefits are taxable.

To prevent double taxation, employees pay taxes on any subrogated daily social security benefits, but these benefits are not taken into account as part of their net taxable income. It should be noted that medical leave constitutes a special case in which the amount of the employee’s daily social security benefits must only be taken into account when calculating their income tax withholdings for the first two months of leave.

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