Employer Taxes in France: Payroll Tax Explained
One key component of employer taxes in France is the payroll tax. This tax is applicable to employers who are not liable for VAT and operate in metropolitan France or an overseas department. It is calculated on the annual remuneration paid, using a progressive rate scale.
Explore related content: Learn more about calculating the French real estate wealth tax (IFI).
Who Is Liable for the Payroll Tax?
The payroll tax applies to any employer based or domiciled in France, regardless of where the employee lives or works, if any of the following conditions are met:
The employer is not liable for VAT in the year the salary is paid.
The employer is partially subject to VAT and, in the previous year, had less than 90% of turnover taxed.
The employer had less than 10% of turnover subject to VAT in the year before paying wages.
Employers Typically Affected Include:
Professionals in liberal occupations
Public establishments (excluding municipal groups)
Banks, insurance firms, stockbrokers, and financial institutions
Social or administrative bodies (profit or nonprofit associations)
Companies with civil (non-commercial) activities such as real estate investment
Property owners
Cooperatives, mutual societies, and agricultural professionals
For more details, refer to the official page on payroll tax obligations.
Which Employers Are Exempt from Payroll Tax?
Some employers benefit from exemptions, such as:
Those with a turnover below the VAT exemption threshold (e.g. micro-entrepreneurs)
Government bodies and public administrations
Individuals hiring full-time in-home help or maternal assistants (part-time hires are excluded)
Certain agricultural employers, including livestock or educational farms
Institutions of higher education delivering State-recognized Master’s degrees (Bachelor +5)
Specific public sector organizations, including:
Public Cultural Cooperation Establishments (EPCCs)
Public Environmental Cooperation Establishments (EPCEs)
Note: As of 1 January 2024, payroll tax no longer applies to salaries paid by EPCEs.
How Is the Payroll Tax Calculated?
The tax is calculated based on the CSG (General Social Contribution) base for earned income, which includes:
| Income Type | Taxable? |
|---|---|
| Wages, bonuses, allowances, benefits in kind or in cash | Yes |
| Artist-author income | Yes |
| Parliamentary and employee allowances | Yes |
| Guaranteed income for disabled workers | Yes |
| Rental income from business premises | Yes |
| Self-employed earnings | Yes |
| Flat-rate deduction for professional expenses | No |
| Replacement income (e.g. sick leave, work accidents) | No |
| Employer-paid social security benefits | No |
| Training fund contributions | No |
| Industrial technical center wages | No |
| Daily social security benefits | No |
| Compensation for partial or temporary unemployment | No |
| Apprentice salaries below 11% of SMIC (companies >10 employees) | No |
| Apprentice salaries (companies <11 employees) | No |
| Salaries of teachers at apprenticeship centers | No |
| Earnings under employment support or CUI-CAE contracts | No |
| Internship bonuses (exempt portion only) | No |
Important: Although some payments are exempt from payroll tax, they remain subject to CSG.
How to Determine the Taxable Base
Companies with less than 10% of their prior year’s turnover subject to VAT must apply a taxation ratio:
Formula:
Taxation Ratio (%) = (Non-VAT deductible revenue / Total revenue of year N-1) × 100
Example:
Year N taxable remuneration: €1,000
Year N-1 total revenue: €3,000
€1,600 from VAT-exempt activities
€600 VAT-taxable
€800 VAT-exempt but non-deductible
Taxation ratio: (1,600 + 800) / 3,000 = 80%
Taxable base = €1,000 × 80% = €800
Reminder: If the total payroll tax due is under €1,200, it is not payable, and no declaration is required.
Payroll Tax Rates
Three payroll tax rates apply progressively based on individual employee gross salaries:
| Rate | Percentage | Annual Salary (2025) | Monthly Salary (2025) |
|---|---|---|---|
| Standard Rate | 4.25% | Up to €9,147 | Up to €762 |
| First Increased Rate | 8.50% | €9,147 – €18,258 | €762 – €1,522 |
| Second Increased Rate | 13.60% | Above €18,258 | Above €1,522 |
Example Calculation (2024 salary of €5,600/month):
Apply 4.25% on the full amount
Add 4.25% on the salary between €748 and €1,494
Add 9.35% on the portion exceeding €1,494
Result:
Payroll tax = [5600 × 4.25%] + [(1,494 – 748) × 4.25%] + [(5,600 – 1,494) × 9.35%] = €654
Taxable income and tax owed are rounded to the nearest euro.
Payroll Tax Discounts and Rebates
Discount for Employers
A discount applies if the annual payroll tax falls between €1,200 and €2,040:
Formula:
Discount = 0.75 × (€2,040 – actual tax)
This is also applicable monthly or quarterly:
Monthly tax between €100–€170 → Discount = 0.75 × (€170 – actual tax)
Quarterly tax between €300–€510 → Discount = 0.75 × (€510 – actual tax)
The final discounted amount should be entered on line A of form No. 2501 or 2501 K, and adjusted during annual settlement using form No. 2502.
Note: Rebates (as opposed to discounts) only apply to associations and are calculated based on income or property value.
How to Declare and Pay the Payroll Tax?
The reporting frequency depends on the tax amount paid the previous year.
If the tax was below €4,000:
File an annual declaration before 15 January of the following year using form No. 2502-SD, submitted electronically.
In Special Cases:
If the business is transferred or closed → Declare within 60 days
If the employer dies → Declare within 6 months
Important: Payment must be made electronically through the company’s professional tax account or an authorized EDI partner.
Final Notes on Employer Taxes 🧾
Understanding the payroll tax is crucial for any organization navigating employer taxes in France. Whether you’re running a small nonprofit, a university, or a financial institution, staying compliant requires careful attention to turnover, VAT liability, and applicable exemptions.
