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Frequently Asked Questions

French Tax Law :

Is the employee required to deduct income tax from his employees pay cheques ?
Corporation tax – what is the current rate ?
Does withholding tax apply on dividends paid to shareholders outside France ?
Tax – what other taxes are bodies corporate subject to ?
What rules apply to intercompany transactions ?

Is the employer required to deduct income tax for his employees pay cheques ?

No, personal income tax returns are filed by the taxpayer under his or her responsibility. The employer, however, must withhold social security and similar contributions from the employee's pay cheque.

Corporation Tax - what is the current rate ?

Corporation Tax is payable upon the net profits of the corporation. The rate is currently fixed at 33.33¨%, plus a surtax of between 10 and 25%, which brings the effective tax rates to either 36.67% or 41.66%.

Does withholding tax apply on dividends paid to shareholders outside France ?

A 25% withholding applies to dividends paid by French companies subject to corporation tax to non-French beneficiaries (companies or individuals), with two significant exceptions : (a) dividends paid to an EU-based parent corporation are exempt from the withholding tax, subject to certain conditions ; (b) most double tax treaties provide for a reduction or a cancellation of the withholding tax, but it should be noted that specific filings are required for the application of the treaty rate or the exemption.

Tax - what other taxes are corporate bodies subject to?

Social security contributions are levied on gross salaries at 35 to 45% for the employer, and 14 to 20% for the employee. A separate general social security contribution is levied on all income at a rate of 7.5% in most cases. A social debt repayment tax is due on all income at the rate of 0.5%. A specific local business tax, known in French as the Taxe Professionnelle (T.P.), is due by all French business entities, be they companies or individual undertakings. The calculation thereof is based upon the annual rental value of their tangible assets linked to a proportionate amount of the overall salary bill, (although the component based on salaries is gradually disappearing).The average annual rate is 22%, but it varies according to the geographical location of the business entity.

What rules apply to intercompany transactions ?

Management fees and transfer prices between related companies must be set at arm's length. Supporting documentation is required for the determination of such prices. Special regulations apply to transactions with related companies situated in low tax countries.

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