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Withholding tax system: how should foreign companies do?

The withholding tax will come into effect in France on January 1, 2019. Employees who are french resident will have their income tax deducted directly by their employer from their net salary.

The case of a foreign employer for the withholding of income tax

Whether or not a company is established in France, if it carries on an activity there, it will have to withhold the tax from January 1st, 2019, directly on the salaries of its employees. On the other hand, the foreign company must, in principle, go through a tax representative established in France, and accredited by the French tax authorities, in order to carry out the necessary formalities. It must be designated before the introduction of the withholding tax on 1 January 2019.
It will therefore have the role of completing the formalities required by the company, and to return the taxes levied to the French Tax Administration.

If the foreign employer has not designated a tax representative before the defined date, the French tax authorities will therefore consider that the tax has not been levied, and therefore that it has not been paid. The consequences can therefore be late penalties and interest, for example.

Countries exempt from designation of a tax representative

Some companies may be exempted from the appointment of a tax representative in this context if:

  • The company is established in the European Union
  • The company is established in a State Party to the European Economic Agreement (Iceland, Liechtenstein and Norway)
  • The company is established in a State having concluded an administrative assistance agreement with France

ASD Group offers a Tax Representation service, particularly in the context of withholding tax for foreign companies. Contact our experts now, they can assist you in the preparation of new formalities.

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