Exit Tax France: How the French Flat Tax Works in 2025

As part of his economic modernization efforts, President Emmanuel Macron introduced a new taxation method for capital income called the Prélèvement Forfaitaire Unique (PFU), or Flat Tax. This tax reform, effective since January 1, 2018, plays a central role in discussions around exit tax France, especially for residents moving their financial assets abroad.

This detailed guide explains the Flat Tax system in France, who it applies to, and when it might be more favorable than the progressive income tax model. It also explores its connection to capital mobility and expatriation, offering key insights for those concerned with exit tax France regulations.

📌 For a visual and legal summary, check this complete guide on Legalstart.
📍 You can also explore our internal guide at ESCEC International.

What Is the Flat Tax in France?

The Flat Tax, also known as PFU or Macron Tax, applies a single fixed rate to specific types of capital income, as opposed to France’s traditional progressive tax scale.

This rate is identical regardless of the taxpayer’s total income, and no income brackets are considered. The aim of the PFU is to boost investment activity while simplifying capital-related taxation rules—an important component in exit tax France implications for entrepreneurs and investors.

Before and After the Reform

Prior to January 1, 2018:

• Dividends and interest were taxed at the progressive income tax rate.

• Dividends benefited from a 40% deduction.

• Combined with social charges, top marginal tax rates could reach nearly 60%.

Since January 1, 2018:

• Interest and dividends are taxed at a flat 30% rate (12.8% income tax + 17.2% social charges).

• The 40% deduction on dividends no longer applies under the Flat Tax.

Taxpayers can still opt for the former progressive system, recovering the 40% dividend allowance and a partial CSG deduction (6.8%).

Flat Tax Rate in 2025

The Flat Tax remains set at 30% for capital income in 2025. This applies to French tax residents.

⚠️ Discussions are ongoing about a potential increase. The rate for dividends could rise to 33% in the coming years.

How Is the Flat Tax Calculated?

The calculation is straightforward:

• 12.8% for income tax

• 17.2% for social charges = Total: 30%

Example:
On €10,000 of capital income, you pay €3,000 in taxes, keeping €7,000 net.

💡 Online tax simulators can help you estimate Flat Tax amounts on dividends and interest.

Who Is Subject to the Flat Tax?

The Flat Tax targets individuals receiving capital income, typically from:

• Dividends (from SAS, SARL, SASU, EURL, etc.)

• Interest from bank or investment accounts

• Capital gains from selling shares or company equity

❗ Note: Real estate capital gains are not covered, as they derive from property, not financial holdings—important for anyone considering exit tax France and liquidating different types of assets.

Which Investments Fall Under the Flat Tax?

Included:

• Dividends, fixed-income products, and interest

• Capital gains from financial securities

• Life insurance (in certain conditions)

• PEL and CEL accounts (subject to opening date)

Excluded:

• Regulated savings products such as:

  • Livret A

  • LEP (Popular Savings Account)

  • Livret Jeune

  • LDDS (Sustainable Development Accounts)

  • PEL accounts under 12 years

  • CEL accounts opened before 2018

✅ The Flat Tax is not part of the PAYE system in France.

Choosing Between Flat Tax and Progressive Income Tax

By default, capital income is taxed under the Flat Tax. However, it’s possible to opt into the progressive income taxmodel if more beneficial.

Advantages of the Flat Tax

• Automatic application—no steps required

• Simplicity—uniform rate simplifies budgeting

• Efficiency—often more favorable for higher brackets

Switching to the Progressive System

To opt for the progressive scale:

• Indicate your choice by checking box 2OP on your tax return.

• This choice applies to all capital income—no selective application allowed.

With the progressive system:

• You regain the 40% dividend allowance

• CSG may be partially deductible (6.8%)

• Long-term capital gains may qualify for additional reductions based on holding duration

🧠 Strategic tip: Taxpayers in the 0% or 14% brackets often benefit more from the progressive system.

Flat Tax vs. Progressive Income Tax: A Comparison

This decision depends on:

• Your marginal tax rate

• Family composition

• Amount and type of capital income

Example:
For €10,000 in capital gains:

🧮 If you qualify for an 85% abatement, the Flat Tax is not likely to be favorable—even in the top tax bracket.

How Is the Flat Tax Applied?

Flat Tax is automatically deducted unless you opt out during the tax declaration. The 30% includes:

• 12.8% income tax

• 17.2% social contributions

When Do You Pay the Flat Tax?

• Dividends/interest: Deducted when income is paid (12.8% upfront), and the remaining due at filing

• Capital gains: Paid upon filing

• Life insurance: Withheld on payment (12.8% or 7.5%) depending on policy duration, with social taxes added later

How to Pay Flat Tax on Dividends

Declare dividend income in box 2DC during your annual tax return.

Use a dividend Flat Tax simulator to estimate what you owe.

Can You Avoid the Flat Tax?

Avoidance here means choosing the progressive tax model rather than evading taxation.

Taxpayers receiving dividends (even via SASU or other structures) can avoid Flat Tax by opting into the progressive system—but only if it results in a lower total tax burden.

⚖️ Consult a tax advisor to evaluate your personal situation, especially in cross-border or exit tax Francescenarios where capital mobility is involved.