France payroll and tax overview.

One of Europe’s largest nations, France is situated at the western edge of continental Europe, sharing its eastern land border with Belgium, Luxembourg, Germany, Switzerland, Monaco, and Italy, and its southern border with Andorra and Spain. Once a global empire, France has a well-established political and economic presence: in 2019, France was the seventh-largest economy in the world with a GDP of $2.7 trillion and 1.5% growth. The French business landscape is highly developed and diverse, the government has been taking steps since the 1980s to decrease the dominance of state infrastructure in favour of the private sector. Important industries include transportation, electronics, textiles, and tourism but France also has a reputation for innovation and technological development: the French nuclear energy industry in particular has seen significant growth thanks to a lack of domestic oil production. France is one of the world’s largest importers and exporters and incentives for setting-up a business in the country include a lack of administrative restrictions and strong government support for innovative commercial projects. France is a founding member of the European Union and is also a member of the UN, NATO, the G7, the OECD, and the WTO. In 2019, France ranked 32 on the World Bank’s Ease of Doing Business Survey.

Why Invest in France?

There are plenty of reasons to choose France as an investment destination:

• FDI incentives: The French government is working to encourage foreign direct investment with specific incentives. These include a variety of support agencies, such as the Invest In France Agency (IFA), which link businesses with relevant government departments and funding bodies, provide advice, and promote the investment process.
• Reforms: As part of a major effort to enhance the domestic business environment, major tax reforms have been introduced in France, including tax cuts for productive investments, and a more effective system of tax credits. Labour laws have also been made more flexible, while corporate law has been streamlined.
• Export hub: According to the WTO, France is the second-largest exporting country in the EU, offering access to lucrative markets across Europe and the world. To facilitate its export volume, France has developed over 11,000km of motorway, high-speed rail connections to numerous European business centres, and some of Europe’s best sea and air links, including the ports of Marseilles and Le Havre, and Charles De Gaulle Airport.
• Research & development: The French government places particular value on the R&D sector, and especially ventures in the engineering, pharmaceutical, and telecommunication industries. The government incentivises R&D with tax credits and infrastructure development - key targets include the automotive, biotechnology, software, and computer hardware industries.
• Set-up costs: France’s business set-up costs are lower than the United States, Japan, and other European competitor countries, while office space in Paris is around 50% cheaper than London. The cost of setting up a business amounts to less than 1% of per capita income - as opposed to around 9% in other G20 countries.
• Business culture: French business culture values directness and focus - a trait which encourages efficiency and diligence. Long term business relationships are valued along with respect for intellectual property and the exchange of information.

Foreign Direct Investment in France

The French government welcomes inward investment in France, with various incentives particularly in markets that have been subject to hardship during the global recession. State and local governments encourage economic development. Foreign and local investors are treated equally, and are both eligible for investment incentives.

What Do I Need to Know When Starting a Company in France?

The company is not required to have a legal entity established in order to process a payroll. Some conditions however may be required when processing payroll (CNFE registration or a liaison office set up); the main is the “Unions de Recouvrement des Cotisations de Sécurité Sociale et d'Allocations Familiales” (URSSAF) registration which handles social security deductions.

The timescale for completion of this process is four weeks.

Business Banking in France

It is not mandatory to make payments to employees or French authorities from an in-country bank account.

Generally, banks are open from Monday to Friday 09.00AM to 6.00PM. Some banks are open from Tuesday to Saturday 09.00AM to 5.00PM.

What Are the Working Days and Working Hours in France?

The working week in France is Monday to Friday. The legal duration of work is 35 hours per week. The duration can be annualized to 1607 hours or 218 days. In that case, the time at work can be modulated depending on high or low seasons.

In counterpart of these annual rules, employees are granted RTT (working time reduction days), extra hours are paid or “recovery days” are granted. It depends on the collective agreement or a corporate agreement.

Basic Facts about France

General Information

France lies at the western edge of continental Europe, on the shores of the Atlantic ocean. Annexed by Rome in 51 BC, France grew to become the dominant European power, with a monarchy which lasted until the French Revolution of the 18th century. Under its famous leader, Napoleon, France established a powerful empire, and in the 21st century its global influence endures, with overseas territories in locations across the world. Long considered an epicentre of philosophy, art and science, France ranks consistently high in global standards of education, life expectancy, and healthcare, and, as a member of the European Union and the United Nations Security Council, is also a significant political power. France shares land borders with numerous of European countries, including Belgium, Germany, Switzerland, Italy, and Spain, while its topography includes alpine mountain ranges, fertile valleys, Mediterranean beaches, and deep forests. France’s climate varies from wet and cool in the north, to hot and dry in its southern regions.

Full name: French Republic

Population: 67.064 million (World Bank, 2020)

Capital: Paris

Major language: French

Major religion: Christianity

Monetary unit: 1 euro = 100 cents

Main exports: Machinery and transport equipment, agricultural products, including wine

GNI per Capita: US $42,400 (World Bank, 2019)

Internet domain: .fr

International dialling code: +33

The tax year runs from 1 January to 31 December.

Apprenticeship and Training Tax in France

These taxes are due when the client has a permanent establishment in France only. This excludes the liaison offices.

• They are paid every year before March 1st
• Depending on the size of the company, it is possible to deduct training expenses or trainees wages and indemnities
• When the company decides to provide training to employees, the company can receive grants from the institution

When it comes to paying contributions to tax authorities, the deadline depends on the size of the company; however, contributions should be paid by the 5th each month for companies with more than 50 employees and by the 15th for companies with less than 50 employees.

Income Tax in France

From January 2019, personal income taxes are withheld on payslips.

The current system of income tax collection is replaced by a withholding tax “PAS” (“prélèvement à la source”). It covers the vast majority of incomes: salaries and wages, pensions, replacement income, self-employment income and property income.

Therefore, the employer will become a collector and third party payer of personal income taxes.

The social security ceiling for 2021 is still €3,428 per month, and consequently to €41,136.00 a year.

When preparing payslips, salary bracket 1 now extends to €3.428, bracket 2 is the portion of salary between €3,428 and €13.712.

Regarding social security contributions, the contribution rate based on the total wage is for the employee equal to 22 %, for the employer 45 % of the gross wage.

The family allowance contribution rate is based on the total wage and varies depending of the remuneration from 3.45% to 5.25%.

Supplementary pension contributions are 10.02% (4.01% employee, 6.01% employer) on T1 and for T2 24.29% (9.72% employee, 14.57% employer).

The apprenticeship tax is 0.68% and the contribution to training tax is 0.55% or 1.00% according the size of the company, of the total remuneration.

Every January 1st, the work accident contribution rate is modified (a letter from the CARSAT is informing you of the new rate) including the transport tax, in some cases. NB: the transport tax is only required by some municipalities and only from companies with more than eleven employees. You will find the rate that your municipality charges on URSSAF’s website.

Lastly, the FNAL (national housing aid fund) contribution is 0.10% or 0.50% according to the number of employees, contributions are only for the employer based on the total wage.

URSSAF & Social Security

(Sickness, old age, basic pension, accidents at work, etc.). The organization responsible for collecting social security contributions from employers; employees; CSG; CRDS contributions; unemployment and various taxes.

Deadlines for the payment of the contributions are:

• For companies with more than 50 employees, on the 5th of the following month
• For the companies with less than 50 employees, the 15th of the following month

In case of Sickness, Company Accident, Maternity and Paternity the institution can reimburse the wage (capped) and there is a payroll treatment in order to get the reduction of contributions (Gross up).

Unemployment in France

This compulsory contribution maintains approximately 57% of the gross wage, in case the employee loses his job (except resignation). The duration of the coverage depends on the seniority and the reason for unemployment. Employees may have a maximum of 23 months and more may be retained for employees over 55 years of age.

The unemployment contributions are paid to the URSSAF, except for expatriates.

Compulsory Life Insurance in France

The life and death insurance is compulsory for all managers (Cadres). In case the company does not grant the compulsory life insurance to its executives, and in case of decease, the company will have to pay the sums to the heirs (3 x the annual Social Security ceiling). The collective labor agreement can oblige the company to implement a life and death insurance for all categories of employees.

Medical Insurance in France

Medical insurance is set up in order to complete the medical expenses that are not reimbursed by the Social Security. Since January 2016, it is compulsory to offer medical insurance to all employees (from the first employee). Some collective labor agreements have imposed a compulsory medical coverage but it is rare and market specific.

Additional Pension Scheme in France

Not mandatory in all cases, but a collective bargaining agreement can make it mandatory. Also an employer can decide to grant it.

There might be a benefit in kind when social security limits are reached. Monthly social security contributions are paid quarterly.

Reporting Tax & Social Security in France

Monthly

The DSN - Nominative Social Statement is an approach to simplify the steps taken by employers with regard to Social Protection and Administration. It aims to replace all the periodic or eventual declarations and various administrative formalities addressed until now by employers to a variety of actors (CPAM, Urssaf, Pôle Emploi, Tax department, Special Caisses Regimes, etc.).

The DSN is based on a single, monthly and dematerialized transmission of payroll data and on reports of events; it replaces the DADS (year-end declaration).

Quarterly

Depending on the institutions, some declarations must always be made -

• ASSEDIC unemployment contributions bases must be submitted quarterly to GARP for expatriates
• Declaration Nominative - Medical & Life Assurance

Yearly

• “Fiche Fiscale”, employee summary of earnings not compulsory to provide document to the employee but the employer can decide to do so
• Taxes on training, building, apprentice and tax on disabled employees, have to be declared and paid (if applicable)

New Employees in France

A new starter that has a social security number will require a Hiring Declaration (DPAE). This is to be completed and sent to the URSSAF before the employee starts. The employee must also be registered to the disability/decease and medical insurances by the employer.

If a new starter does not have a social security number, the employee must apply to the social security institution to request a number. The new start will firstly get a provisional social security number and after several months their final number.

A social security number is mandatory for anyone starting any employment.

The documents required for setting up an expat new start include:

• ID / work permit or prior detachment form

Work Leavers in France

There is no specific timescale for leavers to receive their final payment. Final documents must be returned at the end of the following month.

No specific notification has to be made to authorities in the event of a leaver; however, an ASSEDIC wage certificate has to be filled in on the website of the unemployment agency.

Payroll in France

An employer must provide a payslip (legal obligation); paper or electronic payslips are very common in many workplaces. From January 2017, electronic payslips were authorized in France, unless the employee is opposed.

In the interests of ensuring that everyone understands when and how wages or salaries have been calculated and paid, an employee has the right to access or obtain a copy of the employer's wage and time records relating to him/her. For each of their employees, the employer must keep this record. It would include details such as, but not limited to:

• The kind of work the employee does
• The amount of hours/days that the employee works
• The wages paid to the employee each week/month and the method of calculating those wages
• The nature of the employment agreement (employment contract)

Payroll reports must be kept for at least five years. The records can be kept electronically as long as the records can be printed out on request.