Everything You Need to Know About the French Payroll Tax

In France, the payroll tax (taxe sur les salaires) applies to employers established in the country who pay wages but are not subject to value-added tax (VAT) on the majority of their business revenue. This guide explains how the tax works, who is liable, who can be exempted, how it’s calculated, and how to declare and pay it.

Who Has to Pay the Payroll Tax?

The payroll tax is due by employers who:

• Are based in France (regardless of the employee’s residence or place of work), and

• Do not charge VAT or only charge VAT on less than 90% of their turnover from the previous year.

This includes:

• Certain liberal professionals

• Public institutions (except intermunicipal organizations)

• Banks, insurance companies, and some brokers

• Non-profit organizations and associations

• Civil businesses such as investment and real estate companies (except for real estate developers or traders)

• Landowners

• Agricultural cooperatives, mutuals, and trade organizations

Who Is Exempt?

Employers are exempt from the payroll tax if they meet any of the following criteria:

• Their previous year’s turnover was below the VAT exemption threshold (e.g., micro-entrepreneurs)

• They are the State or a local government

• They are private individuals employing domestic workers full-time

• Certain agricultural businesses (e.g., crop or livestock farms)

• Higher education institutions awarding state-recognized Master’s degrees

• Specific public entities, such as:

  • Public cultural cooperation institutions (EPCC)

  • Environmental cooperation institutions (EPCE), as of January 1, 2024

How Is the Tax Calculated?

The taxable base is generally the same as that used to calculate France’s Contribution Sociale Généralisée (CSG) on earned income. This includes gross salaries, bonuses, allowances, and both cash and in-kind benefits.

Applicable Rates in Mainland France

The payroll tax is progressive, based on each employee’s annual gross salary. The rates for salaries paid in 2024 (tax due in 2025) are as follows:

Note: The total tax is rounded to the nearest euro.

Rates in Overseas Departments

In French overseas departments (DOM), a flat rate applies with no progressive scale:

• Guadeloupe, Martinique, Réunion: 2.95%

• Guyane, Mayotte: 2.55%

The higher tax brackets do not apply in these regions.

Special Case: VAT Threshold

If your business was subject to VAT on less than 10% of its revenue the prior year, you must calculate a tax ratio(percentage of VAT-exempt income over total income). The payroll tax base is then adjusted by this ratio.

Exemptions and Reductions

No payroll tax is due if the total owed for the year is under €1,200.
If the tax due is between €1,200 and €2,040, a reduction applies:
Discount = 75% of the difference between €2,040 and the calculated tax.

Example:
If your calculated tax is €1,400, the reduction is €480.
Final tax owed: €1,400 – €480 = €920

How to Declare and Pay

The frequency of declarations and payments depends on the amount due the previous year:

• Less than €4,000:
  Submit form 2502-SD and payment by January 15 of the following year.

• Between €4,000 and €10,000:
  Submit quarterly provisional forms 2501-SD and payments by April 15, July 15, and October 15. Final adjustment and form 2502-SD are due by January 31 of the next year.

• Over €10,000:
  Monthly 2501-SD filings due within 15 days after each month. The December payment and final adjustment are due by January 31 the following year.

Important: In the event of business closure, the annual return must be filed within 60 days. In case of death of the employer, the return is due within 6 months.

All payments must be made online via your professional tax account or through an authorized EDI service provider.