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Payroll & Tax in France

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France payroll & taxation

There are specific rules for payroll and taxation in France, depending upon the type of business structure used.  The primary concerns for a foreign company that needs to comply with tax laws in France are individual income tax for employees, social security costs, health insurance contributions, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns.

Your Payroll Options in France

Remote Payroll

A remote payroll in France is where a foreign company, i.e. a non-resident company, payrolls a resident employee in France. Under French law only incorporated entities are allowed to have employees based in France. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in France is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in France under one of the forms available, but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to France may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a French payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with French employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in France to a GEO, like Shield GEO. This is possible for both foreign workers and France nationals. This is the easiest, fastest and safest way to payroll staff in France.

Shield GEO manages all aspects of payroll for workers in France, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in France

Information Explanation
Currency ?

Euro (EUR)

Employee Information Required ?

The following information are needed:

  • Full Name (Title, First, Middle, Last)
  • Address/ Postal address
  • Telephone number
  • INSEE code (National identification number/ Social security number)
  • Any pension details (if applicable)
  • Any disabilities that’s relevant to work
  • Various businesses may require further details
Tax Registration Requirements ?

Employees are required to maintain their own taxes and file a tax return each year.

Social Security Registration ?

Employees are required to register for social security. When employing staff, employers are required to register themselves with the URSSAF (Unions de Recouvrement des Cotisations de Sécurité Sociale et d’Allocations Familiales, meaning the Organizations for the payment of social security and family benefit contributions). Employers will have to make contributions towards their employees social
security

Documentation Required for New Employees ?

New employees must be provided with an employment contract which is a written statement of all the terms included in the agreement of the job role. A French employment contract must include the following:

  • Employee’s job title and professional qualification
  • Salary and bonus
  • Convention Collective, relative to the employment (an agreement between employers’ associations and
    trades unions regarding work conditions and agreements)
  • Notice period in case of resignation
  • Place of work
  • Duration of the contract
  • Trial period
  • Notice period

Some contracts may also include either a Clause de mobilite or a clause de non-concurrence. A Clause
de mobilite states that an employee agrees to accept any future job transfers which may be requested. If
the employee does not agree then it may result in the employees contact being terminated. A Clause de
nonconcurrence states that an employee will not work for either a fellow competitor or an other company in the
same sector for a set period of time after the termination of the employment contract.

Corporate Income Tax Rate

A company that is incorporated in France is deemed to be tax resident. A foreign company could be French resident if it is controlled and managed in the country.

The standard corporate income tax rate is 33,33%. Small or new businesses may be subject to lower rates. A 3.3% social surcharge applies to the mentioned rate when tax liability exceeds  €763,000.

Payroll Tax

Payroll tax is levied on entities that collect revenue not subject to VAT. This mostly applies to banks and financial institutions.

The rates:

  • 4.25% on individual salaries up to €7,705;
  • 8.5% on the portion of the salary in €7,705 -€15,385 bracket;
  • 13.6% in €15,385 – €151,965 bracket;
  • 20% on the excess over €151,965.
Sales Tax

Value Added Tax (VAT) is imposed on the sale of goods and the provision of services.

The standard VAT rate is 20%. Reduced rates of 5.5% or 10% apply to most food products and some other items. There is also a preferential rate of 2.1%, which is payable on some periodicals and medicines reimbursed by the social security system. Certain transactions could be exempt from VAT.

Withholding Tax

There is a 30% withholding tax on dividends that are paid to a nonresident shareholder by a French corporation, unless some treaty rules apply.

Interest paid to a nonresident lender by a French company is generally not subject to withholding tax.

A 33,33% withholding tax is imposed on royalties paid to a nonresident entity by a French company. Fees paid for commissions, consultancy and services performed or consumed in France are also subject to this rate. The rate may be reduced or eliminated under a tax treaty or under a EU interest and royalties directive.

Other Tax

Resident and nonresident companies operating in French must pay the CET (“contribution economique territoriale”). The CET consists of a real property tax and a tax calculated on adjusted gross receipts of the French business.

The sale of real property is subject to a transfer tax at a maximum rate of 5.8%. The sale of shares of a limited liability company (SARL) or commercial partnership (SNC) is subject to a transfer tax equal to 3% of the sale price, minus a sum equal to the number of units sold x EUR 23,000/total number of the company units.

A number of minor taxes also apply to corporations in France to fund specific social purposes.

Tax Figures

Information Explanation
Corporate Income Tax ?

A company that is incorporated in France is deemed to be tax resident. A foreign company could be French resident if it is controlled and managed in the country.

The standard corporate income tax rate is 33,33%. Small or new businesses may be subject to lower rates. A 3.3% social surcharge applies to the mentioned rate when tax liability exceeds  €763,000.

Income Tax Rate ?
Grossed income Tax Rate (%)
€0 - €9,690 0%
€9,690 - €26,764 14%
€26,764 - €71,754 30%
€71,754 - €151,956 41%
over €151,956 45%

An extra contribution applies to income that exceeds €250,000 for single individuals and €500,000 for married couples. This contribution is extra 3% on income between €250,000 and €500,000 for single individuals (€500,000 – €1,000,000 for married couples) and 4% for income exceeding €500,000 for single individuals (€1,000,000 for married couples).

Payroll Tax ?

Payroll tax is levied on entities that collect revenue not subject to VAT. This mostly applies to banks and financial institutions.

 

The rates:

4.25% on individual salaries up to €7,705;

8.5% on the portion of the salary in €7,705 -€15,385 bracket;

13.6% in €15,385 – €151,965 bracket;

20% on the excess over €151,965.

 

Sales Tax ?

Value Added Tax (VAT) is imposed on the sale of goods and the provision of services.

 

The standard VAT rate is 20%. Reduced rates of 5.5% or 10% apply to most food products and some other items. There is also a preferential rate of 2.1%, which is payable on some periodicals and medicines reimbursed by the social security system. Certain transactions could be exempt from VAT.

Withholding Tax ?

There is a 30% withholding tax on dividends that are paid to a nonresident shareholder by a French corporation, unless some treaty rules apply.

 

Interest paid to a nonresident lender by a French company is generally not subject to withholding tax.

 

A 33,33% withholding tax is imposed on royalties paid to a nonresident entity by a French company. Fees paid for commissions, consultancy and services performed or consumed in France are also subject to this rate. The rate may be reduced or eliminated under a tax treaty or under a EU interest and royalties directive.

 

Employee Social Security (EE SS)

The employee also must pay social security contributions and surcharges, which are deducted at source from their salary payments. Their contributions amount to approximately 20% of salary.

Employer Social Security (ER SS)

France’s mandatory national social insurance system covers health (maternity, disability and death), family allowances, retirement,  housing benefits, and occupational accidents (including illness).

Social security contributions that are payable by the employer could vary depending on the type, size and location of the business, and generally amount to approximately 50% of gross pay.

Payments

Information Explanation
Payment Mode ?

Small, independent business owners may feel that they want to pay their employees by using cash or a cheque. However large companies with a large quantity of employees will find the method of Electronic Payment much easier and quicker to work with.

Frequency of Salary Payment ?

Most employers choose to pay their employee’s once a month, as a salary. However other frequencies include:

  • Daily
  • Weekly
  • Bi-weekly
  • Quarterly
  • Annual
Invoice / Payslips required ?

Yes, employees are required to receive an itemised payslip from their employers. The payslip must include the employee’s gross salary, net salary, social security contributions, complementary pensions, unemployment insurance.

Minimum Wage ?

1,445.38 Euros per month (2014)

Employee Entitlements

Information Explanation
Working on Sundays ?

Sunday working is not allowed by law but there are some exceptions: for example, where there is a
need for production to fulfill the demands of the public (e.g. in food manufacturing, entertainment,
restaurants, etc.)

There are also some situations in which it is possible for businesses to gain a temporary exemption, such as:

  • if the outlet is in a tourist area;
  • if the outlet is located within an ‘area of exceptional consumption’;
  • if the Prefect of the region authorises the opening on economic grounds
Time Off Work ?

Employee annual leave is calculated from 1st June of the previous year until 31st May of the current year. All
employees are entitled to two and a half days of paid leave per month worked. This gives basically 5 full weeks of
vacation a year (because Saturdays are considered in the calculation as ‘working days’. Sundays and public holidays are not included. Employees in France will begin earning their annual leave from the moment they start working. Traditionally, holidays are taken in August. In France this month is ‘sacred’ and the country practically comes to a halt. Some companies officially close and many small shops, restaurants and local service providers shut.

Medical Leave ?

There are two categories of sick leave: work related sick leave and non-work related sick leave. Work related sick leave is defined as any injury or illness that occurs either within the work place, travelling too or from work
and professional illnesses.
Employees are not usually paid for taking sick leave, however in certain circumstances regarding a collective agreement or law, employees may be entitled to receive payment for part of or all of the leave taken.

 

The French Labour Code provides that an employee shall be paid for sick leave, whether work related or not, if the following conditions are satisfied:

  • The employee has at least one year of service on the first day of his/her sick leave;
  • Justification of the sick leave is given within 48 hours and supported by a medical certificate and, if necessary, by another medical certificate issued from a second medical exam requested by the employer;
  • The illness is covered by French social security; and
  • Medical care was provided in France or another country of the European Union or the European Community.

If all of these conditions are met, the employee’s salary for sick leave taken is paid by the French social security.

Employment Termination

Information Explanation
Termination of Employment ?

When an employees employment contract is terminated and they leave the business, there are no document
given.

France

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