France announces 2018 tax proposals – contains employment-related measures

The French government presented their highly-anticipated finance bill for 2018 on 27 September 2017, indicating a number of employment-related measures that will affect both individuals and companies.

The tax package complements recent changes in employment law that are designed to make France a more attractive place for creating jobs, a key part of President Macron’s policy.

The bill is being debated by both houses of parliament before being adopted into law at the end of 2017 subject to confirmation by the constitutional court. Some of the measures included in the bill could apply to income earned in 2017, while others may be applicable only to future earned income.

Some measures affecting individuals include:

• The CSG social surtax (applicable to most types of income) will increase by 1.7%, while employee social charges on employment income would decrease progressively by 4.15%
• Single flat tax on investment income (dividends, interest, capital gains) of 30% including social surtaxes
• Qualified free share plans would remain taxable at progressive rates subject to a 50% deduction for gains up to EUR 300,000
• The current wealth tax would be replaced on 1 January 2018 by a tax applied only to real estate assets with a value over EUR 1.3 million.

Measures affecting companies include:

• Social charges for employers would be lowered by six percent, up to a certain limit. They currently can amount to up to 50% of gross salary.
• Payroll tax applying to corporations not subject to VAT, or where at least 90% of an entity’s annual turnover was exempt from VAT in the previous year, will be abolished for the top payroll tax bracket, with a marginal rate of 13.60% on salaries exceeding EUR 15,417.
• The new withholding tax for residents was postponed earlier in 2017 until 2019. No further detail is provided in the draft bill and whether the withholding tax will be implemented at all is unclear. The withholding tax was to replace the current system that included advance payments, shifting the administrative burden from the taxpayer to the employer.