Withholding at source: calculation, rate, modify…

The withholding tax consists of making pay tax at the same time as you receive your income. If you are employed or retired, the tax is collected by your employer or your pension fund. You pay the corresponding income tax by installments deducted from your bank account directly by the tax authorities if you are self-employed, a farmer or if you receive property income.

Came into force in 2019, withholding tax allows you to determine the percentage of your income withheld for tax purposes. It is determined by the tax authorities and is calculated on the basis of your tax return made in the spring on the income of the previous year.

How does the withholding tax work?

The levy applies to salaries and wages, retirement pensions, unemployment benefits, daily sickness benefits and the taxable portion of severance pay. It is shown on your payslip. The tax is deducted directly from your income by the collector (your employer or your pension fund, Pôle Emploi, health insurance) according to a deduction rate calculated by the tax authorities.

All income submitted to income tax are deducted directly at source by the tax authorities on the basis of the amount of income declared last year.

If you live in France, the levy rate applied to you is determined by the tax department and you get it after filing your tax return.
If you live outside metropolitan France, you are subject to a specific withholding tax which applies to the following income:

• Salaries and wages for an activity carried out in France
• Pensions and life annuities if the organization (or person) paying them to you is established in France

The withholding is calculated by income brackets at the following rates:

These rates apply according to an annual scale and after a reduction of 10%. The rates are different for income from overseas departments.

How is the withholding tax calculated?

The withholding tax is calculated on the basis of your income declarations. In the event of a change in the situation during the year (family or financial situation), the withholding tax rate may be modified or even reduced under certain conditions. You can make your change request directly via your online space, on the tax website.

If you are married or in a civil partnership and you make a joint declaration, you will have the same tax rate as your partner. But if you want a withholding tax rate that is lower than that of your spouse, you can opt for an individualized direct debit rate. Thus, each member of the couple will get a rate based on their own income.

If you do not wish to send your personalized rate to your employer, the latter will apply a neutral rate, generally higher than your personalized rate. If the neutral rate is lower than your personalized rate, you will have to pay every month the difference between the direct debit made and that which would have been made with the personalized rate.

[🧵Thread] The PAS: Withholding Tax
How it works ? 🤔

While doing your tax return, if you’re wondering why you still owe money or why the state owes you, it’s this way 👇

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— Guillaume Simonin (@GuiSimonin) May 15, 2023