Implementation had again been in doubt after President Macron questioned whether software, training and other readiness issues had been resolved.
The system has been undergoing implementation testing for some time, and reports have suggested that there have been significant problems. However, authorities have forcefully denied serious problems.
France is alone in the European Union in allowing taxpayers to pay income tax a year after the income was received. The Budget Minister has stated that switching to a withholding system will bring in an additional 700 million euros simply by preventing fraud.
The new system will be implemented beginning 1 January 2019. The government has posted mandatory educational videos for all employees, and employers with less than 20 employees are eligible for free help in setting up their withholding.
Under the new system, employers will withhold an amount based on each employee’s tax rate and will pay over those amounts to their local corporate tax center. Timing for payments is based on the company’s size, but is no less frequent than monthly.
Transition for employee tax payments will be accomplished by employees paying their 2017 taxes as scheduled in 2018. Then withholding will begin in 2019, and employees will receive a special credit for 2018 taxes on their 2019 return.
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Companies with expat employees in France will need to take steps to move their payroll systems in that country to apply withholding. Equalization calculations may need to be revisited for some employees.