Tax flat in France: How It Works in 2025

Since January 1, 2018, France has implemented a simplified taxation system for capital income called the Prélèvement Forfaitaire Unique (PFU). This measure, introduced under President Emmanuel Macron, aims to encourage investment and simplify tax procedures on financial income.

What Is the Tax flat?

The Flat Tax is a fixed-rate taxation system that applies to certain types of capital income, regardless of the taxpayer’s overall income level. Unlike the progressive income tax brackets, this system imposes a single, uniform tax rate of 30%, which includes:

• 12.8% income tax

• 17.2% social contributions

This rate applies regardless of the taxpayer’s total taxable income. It eliminates the former system where capital income was taxed at progressive rates, with specific deductions (e.g., 40% on dividends). Since its introduction, the Flat Tax has simplified the tax process for many investors.

Learn more about the flat tax on Legalstart.fr

What Types of Income Are Affected by the Tax Flat?

The Flat Tax applies to most financial income, including:

• Dividends from shares in companies (e.g., SAS, SASU, SARL, EURL)

• Interest from savings or investment accounts

• Capital gains from selling shares or securities

• Income from life insurance contracts (under certain conditions)

• Earnings from PEL and CEL savings accounts (depending on the subscription date)

Not included under the Flat Tax:

• Real estate capital gains

• Regulated savings products like the Livret A, LEP, LDDS, and PEL/CEL opened before 2018

Who Pays the Tax flat?

Anyone residing in France who earns capital income may be subject to it. This includes:

• Shareholders receiving dividends

• Individuals earning interest on investments

• Taxpayers realizing capital gains on the sale of financial securities

Note: Real estate gains are not subject to it as they fall under a different asset category.

How Is the Tax flat Calculated?

The calculation is straightforward. If you earn €10,000 in dividends:

• You’ll pay €3,000 in Flat Tax (30%)

• You’ll keep €7,000 after tax

Online simulators are available to help estimate your liability under this system.

What Is the Tax flat Rate in 2025?

In 2025, it remains set at 30%. This includes:

• 17.2% for social contributions

• 12.8% for income tax

There have been discussions about increasing the Flat Tax to 33%, but no changes have been confirmed yet.

Which Financial Products Are Subject to it?

It is applies to:

• Dividends and interest from corporate shares or financial investments

• Fixed-income investments

• Life insurance income

• PEL and CEL interest (depending on date of account opening)

• Capital gains from the sale of financial securities

Which Investments Are Exempt from it?

Certain regulated savings accounts are not subject to itx. These include:

• Livret A

• LEP (Livret d’épargne populaire)

• LDDS (Livret de développement durable et solidaire)

• Youth Savings Account

• PEL under 12 years old

• CEL opened before 2018

It is vs Progressive Income Tax: Which Is Better?

By default, capital income is taxed under it. However, you may opt to be taxed according to the progressive income tax scale by checking box 2OP on your annual tax return.

Benefits of it

• Simplicity: One unified rate makes planning easier

• Often more favorable for high-income households

• Automatically applied unless you request otherwise

When to Choose the Progressive Scale

Choosing the progressive tax scale can be more advantageous when:

• Your overall taxable income is low

• You can benefit from the 40% dividend allowance

• You have significant deductible expenses

Note: Even under the progressive scale, social contributions (17.2%) remain due.

Comparison Example: For a €10,000 capital gain:

In general:

• If you are non-taxable or in a low bracket (0%-14%), the progressive scale is usually more beneficial

• If you fall in the 30%+ brackets, the Flat Tax is more advantageous in most cases

When and How Is it Applied?

It’s rate of 30% (12.8% income tax + 17.2% social charges) applies automatically unless you opt for the progressive scale.

Timing of Payment:

• Dividends & interest: 12.8% is withheld as an advance during the year. The balance is adjusted when filing your annual tax return.

• Capital gains: Tax is calculated and paid when declaring income.

• Life insurance: Tax is withheld at payout (12.8% if contract <8 years, 7.5% otherwise), followed by the flat rate and social charges.

How to Pay it on Dividends

To declare dividends:

• Use box 2DC on your French income tax return

• The Flat Tax is applied automatically unless you opt for progressive taxation (box 2OP)

Online tools are available to help estimate the Flat Tax owed on dividends.

Can You Avoid it?

You can avoid it by opting for progressive taxation. However, this doesn’t mean exemption from taxes. The choice should be made carefully, ideally with expert advice.

Each situation is unique, and the decision to choose one regime over the other should consider:

• Your income bracket

• Your family structure

• The type and amount of your capital income

You can learn more about optimizing tax structures for companies and investments in our guide on holding companies and taxation.

How ESCEC International Can Help

At ESCEC International, we assist entrepreneurs, investors, and international residents in navigating the complexities of tax systems in France. From understanding whether the Flat Tax is right for you to structuring your dividends and capital gains optimally, our experts offer tailored, strategic advice.

📧 Need help with your tax planning or capital income reporting? Contact us for a personalized consultation.