France
This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.
Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.
The national currency is the Euro (EUR). In 2020, EUR 0.88 equalled USD 1. In that year, the average worker earned EUR 38 188 (Secretariat estimate).
1.1. Tax levied by the central government on 2020 income
1.1.1. Tax unit
The tax unit is aggregate family income, but children over 18 are included only if their parents claim them as dependants. Other persons may be fiscally attached on certain conditions: unlike spouses, who are always taxed jointly, children over 18 and other members of the household may opt to be taxed separately. Beginning with the taxation of 2004 income, the law provides for joint taxation of partners in a French civil union (pacte civil de solidarité, or PACS), as soon as the PACS is signed. Reporting obligations for “PACSed” partners are similar to those of married couples.
Earned income is reported net of compulsory employer and employee payroll deductions, except for 2.4 percentage points worth of CSG (contribution sociale généralisée) and the 0.5% CRDS (contribution pour le remboursement de la dette sociale), which are not deductible from the income tax base.
1.1.2. Tax reliefs and tax credits
1.1.2.1. Standard tax reliefs
Work-related expenses, corresponding to actual amounts or a standard allowance of 10% of net pay (with a minimum of EUR 442 and a ceiling of EUR 12 652 per earner).
Family status: The “family quotient” (quotient familial) system takes a taxpayer’s marital status and family responsibilities into account. It involves dividing net taxable income into a certain number of shares [two shares for a married (or “PACSed”) couple, one share for a single person, one half-share for each dependent child, an additional share for the third and each subsequent dependent child, an additional half-share for single parent, and so on]: the total tax due is equal to the amount of tax corresponding to one share multiplied by the total number of shares. The tax benefit for a half-share is limited, however, to EUR 1 570 per half-share in excess of two shares for a couple, or one share for a single person, except for the first two half-shares granted for the first child of a single parent, in which case the maximum benefit is EUR 3 704.
1.1.2.2. Main non-standard reliefs available to the average worker
Certain expenditures to improve or maintain the taxpayer’s primary residence, including outlays for heat insulation or heating adjustments, major capital expenditures and money spent to equip a home to produce energy from a renewable source (30% tax credits, subject to a multi-year maximum); compensatory allowances in case of divorce if paid in a lump sum (25% reduction, capped at EUR 30 500); child care costs for children under six (50% reduction, up to annual expenditure of EUR 2 300); dependent children attending secondary school or in higher education; donations to charities or other organisations assisting those in needs; trade union dues, etc. The exemption of the employer’s participation to the collective contracts of supplementary health cover is abolished in the budget act for 2014 (i.e. income earned in 2013).
1.1.3. Tax schedule
A special rebate for taxpayers with a low tax liability is applied to the amount of tax resulting from the above schedule before reductions and tax credits. To be eligible, the tax on the household’s income must be less than EUR 1 722 for single households and less than 2 849 for the couples. The rebate is equal to 45.25 % of the difference between this ceiling and the amount of tax before the rebate.
The Budget Act of 2020 (article 2) introduced a reform of the personal income system. The reform provides a significant lowering of income tax rate for an amount of around 5 billion euros. 16.9 million taxpayers are benefitting from this reduction from the 1st January, for an estimated average gain of around EUR 300. The changes are the following:
1.1.4. Exceptional contribution on high revenues
An exceptional contribution on high revenues is based on the reference taxable income (“revenu fiscal de référence”). The tax rates are 3% from EUR 250 000 to EUR 500 0000 (single person), 4% over EUR 500 0000 (single person), 3% from EUR 500 000 to EUR 1 000 000 (married couple or civil union) and 4% over EUR 1 000 000 (married couple or civil unions).
1.2. Taxes levied by decentralised authorities
Local taxes levied on working households are:
Residency tax (taxe d’habitation), which is set by local authorities;
There are common rules for each type of tax, to which certain municipalities make certain adjustments.
These local taxes, the rates of which vary widely, depending on the municipality, are not assessed here.
1.3. Universal social contribution (contribution sociale généralisée, or CSG)
The universal social contribution (CSG) was introduced on 1 February 1991. Since 1 January 2018, the rate of CSG has been 9.2%. This rate has been applied to a base of 98.25% as of 1st January 2012. The CSG is deductible against taxable income, but at a lower rate of 6.8%.
1.4. Contribution to the reimbursement of social debt (contribution au remboursement de la dette sociale, or CRDS)
The contribution to the reimbursement of social debt has been in effect since 1 February 1997. Like the universal social contribution, its base has passed to 98.25% of gross pay as of 1st January 2012. The rate is set at 0.5%. Unlike social security contributions, CRDS payments are not deductible from taxable income.
Some contributions are levied on a capped portion of monthly earnings. Since 1997, this ceiling has been adjusted once a year on 1 January. In January 2020, the ceiling was EUR 3 428 (or EUR 41 136 per year).
2.1. Employee contributions
2.1.4. Others
Supplemental pension1 for non-managers and managers: minimum 3.15% up to the ceiling and 8.64% between one and eight times the ceiling.
The CEG (“Contribution d’Équilibre Général”) is a new contribution that replace AGFF and GMP. The rate of this contribution is, for non-managerial workers and managers, 0.86% of earnings up to the social security ceiling and 1.08% between one and eight times the ceiling.
The CET (“Contribtion d’Équilibre Technique”): a contribution of 0.14% on total earnings up to eight times the ceiling, for employees who earnings exceed one time the ceiling.
2.2. Employer contributions
2.2.1. Pensions
8.55% (8.55% in 2019) of gross pay, up to the ceiling, plus a 1.90% (1.90% in 2019) levy on total pay.
2.2.2. Illness, pregnancy, disability, death
13.0% of total earnings (after 13.0% in 2019). The rate has been reduced to 7.0% up to 2.5 times the minimum wage since 1st January 2019 with the conversion of the CICE into a permanent cut in social contributions.
An additional contribution of 0.3% (contribution de solidarité autonomie – (CSA) is levied on total salary.
2.2.3. Unemployment
4.05% of earnings (4.05% in 2019) (4.5%, 5.5% or 7% for some temporary contracts), up to four times the ceiling; in addition, 0.15% (0.15% in 2019) up to four times the ceiling to endow the salary guarantee fund (AGS).
2.2.4. Work-related accidents
Contribution rates for work-related accidents vary by line of business and are published annually in the official gazette (Journal officiel de la République française). In 2020, the average rate is 2.21% (after 2.22% in 2019).
2.2.5. Family allowances
5.25% of total pay. The rate has been reduced to 3.45% up to 1.6 times the minimum wage from 2015 with the responsibility pact, up to 3.5 times the minimum wage from April 2016.
2.2.6. Others
Supplemental pension: for non-managers and managers, 4.72% up to the ceiling and 12.95% between one and eight times the ceiling.
The CEG (“Contribution d’Équilibre Général”) contribution is 1.29% up to the ceiling, 1.62% between one and eight times the ceiling for managers and non-managers. In the table, this is combined with the rates for supplemental pensions.
The CET (“Contribution d’Equilibre Technique”), a contribution of 0.21% on total earnings up to eight times the ceiling for employees who earnings exceed one time the ceiling.
Others (construction, housing, apprenticeship, further training): 2.646% of pay (for enterprises with more than 20 employees). The transport tax is not included because it varies geographically. Contributions to finance a fund dedicated to workers exposed to distressing work conditions (“Fonds Pénibilité”) vary with the levels of exposure of each worker and are therefore not included.
2.2.7. Reduction of employer-paid social insurance contributions
Act No. 2003-47 of 17 January 2003 on salaries, working time and the development of employment (the “Fillon Act”) amended how the reduction of contributions is calculated.
As a result, since 1 July 2005 the maximum reduction has been 26% (in companies with more than 20 employees) for a worker paid the minimum wage. It then declines gradually to zero at 160% of the annual minimum wage. It applies irrespective of the number of hours worked. Since 1st October 2019, the maximum reduction is at 32.54%. For companies with less than 20 employees, it is 32.14% since October 2019.
The Budget Act for 2007 (Article 41 V) bolsters this measure for very small enterprises with effect from 1 July 2007. For employers with between 1 and 19 employees, the maximum deduction was raised to 28.1% at the minimum wage, declining gradually – here too – to zero at 160% of the minimum wage.
In 1 January 2011 the “Fillon act” was modified and included an annualized calculation of the general tax reliefs of employer contributions. For part-time wage-earners, the relief is computed using an equivalent full-time salary and is then adjusted proportionally to the number of hours paid.
From 2015, the Responsibility Pact (Phase 1) includes new reductions of the labour cost: total exemption of all URSSAF employer contributions on the minimum wage (except unemployment contributions); reduction of 1.8 point on employer-paid contributions for family allowance (3.45% instead of 5.25% for salary up to 1.6 times the minimum wage, and up to 3.5 times from April 2016).
The gross annual minimum wage (for 1 820 hours) in 2020 was an estimated EUR 18 473.
2.2.8. Competitive tax credit (CICE - Crédit d'impôt pour la compétitivité et l'emploi)
As for 2015, the competitive tax credit (CICE - Crédit d'impôt pour la compétitivité et l'emploi) will benefit all businesses, regardless of their legal status or economic sector, that employ salaried workers and be liable for either corporation tax or income tax, based on actual profits.
The CICE is based on all wages paid to salaried employees in a given calendar year up to 2.5 times the minimum wage (without taking into account any overtime or additional hours worked). For part-time employees and seasonal workers, the minimum wage corresponding to the working hours stipulated in the contract shall be taken into account.
Since the 1st January 2019, the CICE has been converted into a permanent cut in social contributions.
3.1. Main minimum social benefits
The RSA (revenu de solidarité active) is the minimum income benefit. However, the eight family types studied here earn too high an income to benefit from this benefit.
3.2. Main family benefits (in respect of dependent children)
Family allowances: monthly base for family allowances (BMAF) = EUR 413.16 between 1st January and 1st April 2020, since 1st April, the BMAF is EUR 414.40. The CRDS is levied on family allowances at a rate of 0.5% (no deduction). The amounts in % of BMAF are before CRDS.
The family allowances, granted to families with two or more children, are subject to revenue conditions since 1 July 2015:
Up to EUR 69 309 (+EUR 5 775 per child after the second child), the rate is 32% for two children and 41% per additional child. An extra amount of 16% of the BMAF is reversed if the child is over 14 (the extra amount is not incorporated into the model).
Between EUR 69 309 (+EUR 5 775 per child after the second child) and EUR 92 381 (+EUR 5 775 per child after the second child), the above rates are divided by 2.
Beyond EUR 92 381 (+EUR 5 775 per child after the second child), the above rates are divided by 4.
ASF (Allocation de soutien familial): extra child benefit for isolated parent is at most 28.13 % of the BMAF per month. It is reduced by the amount of child support paid by the other parent to the family.
ARS (Allocation de Rentrée Scolaire): The amount payable depends on the age of the child to reflect needs. The allowance is payable to families or persons with children aged 6 to 18 attending school, and whose income is below a certain level (not incorporated into the model).
Family supplement (Complément Familial): 41.65% of the BMAF. Subject to revenue ceilings, this is paid to families as of the third child. An extra amount (20.83% of BMAF) is reversed for families whose incomes are below a given threshold (not incorporated into the model).
Early childhood benefit (not incorporated in the model) known as PAJE (Prestation d’Accueil du Jeune Enfant): subject to revenue ceilings. It includes:
3.4. In-work benefit
The November 2014 Supplementary Budget Act eliminated the earned income tax credit (Prime pour l’emploi, PPE) so that it could be merged with the in-work income supplement (RSA Activité) and become a single in-work benefit. The in-work benefit was created by the Act of 17 August 2015 on Labour-Management Dialogue and Employment, and has been in place since 1 January 2016. The in-work benefit is better targeted to promote a return to full-time work for low-paid workers.
The amount of in-work benefit is equal to a targeted income, less the maximum between resources and a lump sum.
The targeted income is determined as the sum of three elements:
A lump sum of EUR 553.16 (before CRDS) modulated according to the composition of the household. For instance, it is increased by 50% for couple, then 30% for each child until two (EUR) and 40% for each additional child (EUR). The amount may be increased for a temporary period2 for an isolated parent (28.412% of the basic lump sum for the adult and then 42.804% for each child).
An individual bonus of 29.101% of the basic lump sum is planned for persons whose net income exceeds around 100% of the net minimum wage; this bonus grows linearly if the net income is between around 50% and 100% of the net minimum wage3.
Then ressources are assessed as the sum of the household income, plus the benefits (family benefits and others, except RSA and housing benefits)4. A lump sum depending on the composition of the household (12% of the basic lump sum (EUR 553.16) for a single person, 16% for a couple, 16.5% for three persons or plus) is used to take into account the housing benefits5.
Increased reduction of employer-paid contributions for family allowance: 3.45% instead of 5.25% for salary up to 3.5 times the minimum wage from April 2016 (1.6 times before).
Creation of a new cash transfer benefit for low income workers (“prime d’activité”) which replace the PPE and the “RSA activité”6.
4.1. Changes to labour taxation due to the covid-19 pandemic
The French government has launched several measures in order to address companies’ need for liquidity:
Postponement of social and tax liabilities for all companies upon request for March, April and May. Possibility to spread the payment of social security contributions over a period of up to 36 months. For large companies (or companies that are members of a large group), requests for postponement of tax and social security contributions payments are now conditional to the non-payment of dividends and the non-repurchase of shares between 27 March and 31 December 2020.
Tax relief on a case-by-case basis : Cancellation of social security charges for companies with less than 10 employees that had to close down by administrative decision;
Exemption from social security contributions for SMEs and VSEs during the administrative closure, in particular in tourism, hotels, cafés and restaurants, events and culture sectors.
The French government has also launched measures for enhancing labour flexibility and household income support:
Implementation of an exceptional and massive short time activity scheme with eligibility extended including to domestic workers, day workers, child care assistants and sales representatives. Employees receive an allowance of 70% of their gross salary (approximately 84% of their net salary), and 100% for minimum-wage workers. Earnings are exempted from social security contributions and the CSG rate is lower (6.2% instead of 9.2%).
Exemption from income tax and social security contributions for overtime worked by employees, from 16 March until the end of the state of health emergency, up to a maximum of EUR 7 500 per year (currently EUR 5 000);
Removal of the obligation to sign a profit-sharing agreement for the payment of an exceptional bonus exempt from tax and social charges up to a limit of EUR 1 000 in 2020. In the case of a profit-sharing agreement, the amount of the exceptional bonus is up to EUR 2 000.
To assess the degree of comparability between countries, the following additional information should be taken into account:
Coverage is of the private and semi-public sectors of NACE sections C to K up to 2007 and NACE rev.2 sections B to N from 2008.
The category “employees” encompasses all full-time dependent employees (excluding apprentices and interns).
The figures presented are obtained by applying income tax and social contribution scales to gross salaries as listed in annual social data reports (DADS) in NACE.
There is a break in the average wage time-series starting with the year 2016. That year, the National Statistics Office (INSEE) changed their methodology for the calculations of the average wage.
The equations for the French system are mostly calculated on a family basis. Variable names are defined in the table of parameters above, within the equations table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are as shown for the principal, with “_spouse” values taken as 0.
Notes
← 1. The social protection scheme is named ARRCO for non-managers and AGIRC for managers. The two protection schemes have been merged since the 1st January 2019.
← 2. During at most 12 months over a 18-months period ; or, if there is a child under three in the family, until the child is three.
← 3. The boundaries are defined as : minimum of 59 hours paid at gross minimum wage per hour per month and maximum of 120 hours paid at gross minimum wage per hour per month.
← 4. Capital income, unemployment benefits, pensions or minimum old-age pensions are not taken into account in this model.
← 5. The complete formula uses the minimum of this lump sum tax and the amount of housing benefits, if the family is a tenant. As the model does not include housing benefits, we only use the lump sum in the formula. This method tends to minimize the amount of “prime d’activité” served.
← 6. In the previous model, for 2015 revenues, this reform only affects the income tax (no PPE in 2016) but not the benefits, since the “prime d’activité” will be served as from the beginning of 2016.