The new reporting obligations resulting from the amendment of the wage tax withholding obligations for foreign employers of French tax residents will be applicable in January 2024. Here are the things to know to remain compliant with French law.
Since January 1, 2023, some foreign employers[1] have been exempted from declaring and withholding monthly French tax from taxable remuneration paid in France to employees who are French tax residents and are not affiliated to the French social security system, under the provisions of Article 13 of European Regulation (EC) no. 883/2004 on the coordination of social security systems (employees who pursue an activity in two or more Member States).
The obligation to withhold tax still applies to foreign employers of employees seconded to France under Article 12 of the aforementioned Regulation. Furthermore, Swiss and British employers (for employees affiliated to the British scheme after January 1, 2021), are excluded from the exemption and are therefore still subject to this monthly withholding obligation.
The applicable French tax on the remuneration concerned is now collected by means of withholding tax instalments, paid directly by the employee.
However, foreign employers of such employees are still required to file a declaration with the French tax authorities of the taxable amount, under French law, of the salaries paid in year N.
This declaration must be filed in January N+1 via the PASRAU system. As a result, for the year 2023, the employers concerned will have to be registered with the French tax authorities (“SIEE”, “Service des Impôts des Entreprises Etrangères”, the tax center dedicated to non-resident companies) before the end of the year to obtain a SIRET number and be able to file this declaration.
Companies failing to comply with this obligation may be subject to a fine of not less than €500 and not more than €50,000 per declaration:
- 5% of the sums that should have been declared in the case of omissions or errors; or
- 10% of the sums that should have been declared, in the event of failure to declare within the statutory time limit.
This tax reporting obligation should not be forgotten, more particularly in a context where international remote working has been made easier by the multilateral agreement signed by many EU member States and in force since July 1st 2023. According to such agreement, cross-border teleworkers may remain covered by the social security system of the employer’s state, provided they work remotely at a maximum of 4.9.9% of their working time in their residence state.
The fact that cross-border employees now have the option of working up to 49.9% of their time in their country of residence is not without effect from a tax standpoint.
Indeed, the portion of remuneration corresponding to days teleworked from France by French tax residents will be taxable in France, and will therefore have to be declared by foreign employers via the PASRAU declaration.
Foreign companies that employ French tax-resident teleworkers and decided to extend the possibility offered to these employees to telework from home pursuant to the multilateral agreement should therefore be clearly informed of their obligation to register with the SIEE as soon as possible, in order to obtain a SIRET number before the end of the year and be in a position to declare taxable salaries in France in January 2024.
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The Galahad team is at your disposal for any further information you may require on the SIEE registration procedure and filing of the declaration.
[1] In a Member State of the European Union or in another State or territory having concluded with France a tax treaty containing an administrative assistance clause with a view to fight tax fraud or evasion and an agreement of mutual assistance for tax recovery, mainly in the European Union, Iceland, Norway, Switzerland and the United Kingdom.