Salary Tax in France: Taxation of Individuals

/in /by

General Overview of Salary Tax in France

Foreign employees and executives relocating to France for work can benefit from a preferential tax regime under the salary tax in France framework.

Scope of Taxable Income

Individuals who establish their tax residence in France are subject to salary tax in France on their worldwide income, irrespective of nationality.

Tax is assessed based on all sources of income received by the taxpayer, their spouse, and any dependents, collectively forming the tax household. The applicable rate follows a progressive scale from 0% to 45%, calculated according to the household’s family quotient.

Several provisions allow for tax liability adjustments based on personal circumstances, including a variety of deductions, tax credits (such as for employing domestic help or childcare costs), and specific reliefs.

A French income tax simulator is available here: Tax Simulator

Additionally, specific tax regimes apply to certain categories of income, offering customized taxation benefits, as detailed below.

Key Tax Incentives for Individuals under the Salary Tax in France System

The Impatriates Regime

Foreign executives and employees who relocate to France can benefit from the salary tax in France regime, which provides partial tax exemptions for certain income sources.

Flat Tax on Investment Income

Investment income is subject to a single flat-rate tax of 30%, which includes both income tax and social contributions.

Taxation of Free Shares

The allocation of free shares by companies is treated favorably under the salary tax in France rules, offering tax advantages for employees.

Detailed Tax Incentives under Salary Tax in France

The Impatriates Regime

Foreign executives and employees relocating to France may benefit from tax exemptions on certain income elements under the salary tax in France framework:

  • Bonuses tied to their professional activities in France;

  • Income earned abroad on behalf of the French employer;

  • 50% of foreign-sourced dividends and investment income;

  • 50% of royalties or industrial/intellectual property income from foreign sources;

  • 50% of capital gains from the sale of foreign securities.

Contributions to foreign supplementary pension schemes, paid before moving to France, may also be deducted under this scheme.

Additionally, the regime provides favorable treatment regarding the French real estate wealth tax (IFI).

For more details on how to apply for the impatriates regime and eligibility requirements, see:
Home > International Individual > I am coming or returning to France > Taxation for those arriving in or returning to France > The impatriates regime

For more information on accessing your personal tax account in France, visit: Accessing Your Personal Tax Account

Investment Income: 30% Flat Tax

As of the 2018 Finance Act, a single flat-rate tax of 30% applies to investment income, including dividends, interest, and capital gains. This tax includes both income tax and social contributions:

  • For French residents: Investment earnings are taxed at 30% (12.8% income tax + 17.2% social levies).
    Taxpayers may choose to be taxed under the progressive income tax scale, allowing a 40% deduction on dividends.

  • For non-residents: Distributed income and capital gains on substantial holdings (above 25%) are taxed at a reduced rate of 12.8%.

Free Share Allocations

Mechanism

Companies, whether listed or private, can grant free shares to employees or senior managers.

The allocation must be approved by an Extraordinary General Meeting (EGM), which sets the minimum vesting period (at least one year) and may define a minimum holding period before shares can be sold. Combined, these periods must cover at least two years.

Eligible Beneficiaries

Employees or executives may receive free shares based on criteria such as seniority, performance, or company financial results.

Tax Benefits under Salary Tax in France

For Companies:

  • A contribution of 20% (reduced from 30% as of December 31, 2017) is due after shares vest.

  • Costs related to free share allocations, as well as potential capital losses from share buybacks, are deductible from taxable profits.

For Recipients:

  • Gains from the acquisition (market value at vesting) and capital gains upon sale are taxed in the year of sale.

  • For shares allocated under an EGM authorization from January 1, 2018 onwards:

    • Gains up to €300,000 are taxed under the progressive income tax scale with a 50% flat allowance.

    • Any gains above €300,000 are treated as salary income without the allowance.

Social contributions apply as follows:

  • 17.2% on acquisition gains up to €300,000;

  • 9.7% on excess gains.

Failure to meet vesting or blocking periods results in immediate taxation of acquisition gains as wages and salaries.

Capital Gains on Disposal:

  • Taxed at a flat 12.8% unless opting for progressive income tax scale taxation.

  • Special €500,000 fixed allowance available for retiring executives if shares are held for at least one year.

  • If shares were acquired before 2018, a holding-period-based allowance may apply.

All capital gains are subject to 17.2% social security contributions.
Additional social levies (15.5%) apply to asset income, with partial deductibility of the general CSG contribution. Losses from share disposals can offset the gains from free share allocations.

For further details on salary tax in France and free share allocations, see Taxation for Individuals.