Withholding Tax System Postponed
A withholding tax system that was previously announced to take effect on January 1, 2018, has been postponed to January 1, 2019. The new withholding requirement will apply to many income types, including employment income. The rate of withholding is determined by the tax authorities based on prior tax returns submitted by the taxpayer. If the taxpayer is not on French payroll, the taxpayer is personally responsible for remitting tax on 2019 and future year income on a monthly basis.
Because payments in the existing system are made in arrears (tax due on 2017 income is paid in 2018), there will be a transitional adjustment in 2019 for tax due on income earned in 2018 to avoid a double tax burden on 2018 and 2019 income during the same year. Taxpayers will be entitled to claim a credit on “regular” income earned in 2018, effectively eliminating income tax on 2018 regular income. However, tax will still be due on “exceptional” income earned in 2018.
This change in tax collection will potentially have a significant impact on global mobility programs and administrative processes, especially during the transition period.
This change in tax collection will potentially have a significant impact on global mobility programs and administrative processes, especially during the transition period. In particular, it is possible that no creditable taxes will be generated in tax year 2018 for U.S. citizens and green card holders working in France who are claiming Foreign Tax Credits on the “accrued” method, and therefore tax planning measures should be considered.
AIRINC's Data Points: Your Global Mobility News
Want to learn more? The above excerpt is taken from Data Points,AIRINC's quarterly newsletter.Data Points brings you the latest updates from our Housing, Goods & Services, and Tax departments based on our expert international surveys, which are conducted by our global data collection team on-location.
This quarter's cost-of-living surveys were conducted primarily in North America, Central and South America, the Middle East, Africa, and maritime Southeast Asia-Pacific.