It is a small tax revolution that came into effect on January 1, 2019. With the withholding tax, the income tax will now be levied monthly, on the pay slip of French taxpayers. Initially planned for January 2018, its implementation had been pushed back by Emmanuel Macron in early 2019, to prevent the risk of technical and administrative bugs. We take stock of the reform.
What are the revenues involved?
The SSP (for withholding tax) must concern 38 million tax households. It covers all taxpayers' incomes: wages, retirement pensions, replacement income (including unemployment benefits), income from the self-employed, property income, industrial and commercial profits (BIC) and non-commercial profits (BNC).
Income from movable capital and real estate gains, already deducted at source, are not included in the scope of the reform.
How is the tax collected?
With the exception of the self-employed, whose tax will be levied by direct debit on the 15th of each month or quarterly, the taxpayers all have a collector of income tax.
It is the employer for both private and public employees, Unemployment Insurance Funds for the unemployed, pension funds for pensioners. The tax paid will appear on the pay slip as is the case today for social contributions. So there will be a net salary of IR every month.
The employee gives no information to his employer. The only information transmitted by the tax administration is the rate of levy which reveals no specific information. The employee can also choose the individualisation of his rate of levy if he wants to avoid that his boss deducts from his rate the income level of his spouse. He may even opt for a non-personalized rate (a neutral rate will apply). Sanctions are provided for disclosure.
For the majority of taxpayers who chose to pay the tax (58.8%), changes in the collection remain minor. The monthly installments will be spread over twelve months instead of ten currently, which could be a small cash gain.
What are the different sampling rates?
The tax administration has calculated the tax rate based on the 2017 income declared in the spring of 2018. By the end of January, it will automatically apply to income (wages, pensions, allowances) to give the amount of tax. For non-taxable employees the previous year, the DGFiP will send a 0% rate to employers.
Until September 15, 2018, couples who wished were able to opt for individualized rates to prevent both spouses are taken at the same rate, regardless of their salary.
For reasons of confidentiality, taxpayers who wish to do so have also had the opportunity to request that a non-personalized rate be applied to them. In this case, only the incomes of the person, considered single and without children, are taken into account (the scale is available at the following address).
The actual levy rate will not be known to their employer, but they will have to regularize their situation each year and settle the difference, in case of overpayment. This default rate will also be applied to first-time filers, who were not working in 2017.
What to do in case of a change of situation?
Any changes must be notified to the tax authorities within 60 days after the event. This is particularly the case for a marriage, the signing of a PACS, a birth, the adoption or collection of a minor child, the death of one of the spouses or partners of Pacs, a divorce or a break from Pacs, but also significant revenue changes.
The tax administration will in these cases change the rate within three months. The change can be done from the personal space on impots.gouv.fr. The government has also introduced a non-premium number, 0809 401 401, to respond to requests.
Without notification of change, the rate will be updated each year in September on the basis of the tax return that will continue to be completed each spring.
What scheme for tax benefits?
The deduction for professional expenses does not disappear. A flat rate discount of 10% on the tax base will be taken into account directly in the calculation of the tax rate. Special allowances (for journalists, or maternal assistants) will also be taken into account in the calculation of the rate.
For taxpayers receiving credits and / or tax reductions for the 2017 expenses, they will receive on January 15 a deposit equal to 60% of this credit. This includes tax credits for home care services, child care for children under 6 years of age, donations to works, people in difficulty, but also tax cuts for rental investment. and those for long-term care expenses (EHPAD).
The deposit balance will be paid in July 2019, after the declaration of income to indicate the amount of expenses made in 2018 eligible for credits and / or tax reductions.
What regime for the liberal and independent professions?
The liberal professions and the self-employed will pay a monthly installment (the 15th of each month) or quarterly, calculated according to their incomes of the previous months, and then adjusted according to their actual income. If they anticipate a sharp decline in their income, they can report their situation to the tax authorities.
For micro-entrepreneurs (former autoentrepreneurs) who opted for the levy, nothing changes. Those who are not subject to the discharge payment will be charged a deposit on a quarterly or monthly basis, in their bank account.
Who is responsible in case of error, fraud or default?
The risks are limited if the employer is satisfied to apply the rate transmitted by the tax administration. However, if he is mistaken when calculating the deduction or his transfer to the tax administration, he is responsible for his error, as he is already when calculating the social security contributions.
If he does not pay the tax levied to the tax authorities, it will turn against him, and in no case against the taxpayer.
A white year in 2018?
In order to prevent them from having to pay two taxes in 2019, one at source on the 2019 income and the other, in the usual way, on 2018 revenues, it was decided to erase 2018 income tax. This is why we are talking about a "white year".
A terminology somewhat abusive, in reality. Indeed, only "non-exceptional" incomes will have their taxation neutralized by means of a tax credit – the Modernization of Recovery Tax Credit (CIMR).
Conversely, income that is unusually affected is an extraordinary income and will still be taxed. Movable capital income, real estate gains and capital gains, excluded from withholding tax, are not affected by the CIMR and should therefore be considered as exceptional income.