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PRELEVEMENT FORFAITAIRE LIBERATOIRE (PFL)

Changes to Dividends

Information concerning dividends

As you may be aware there are rule changes occurring within the French Fiscal administrative offices in terms of dividends received and their imposition with regards to French taxation.

At present, there are still issues that remain unconfirmed but to date, we can inform you of the following:

There are 2 ways to declare your dividends in France as

French residents – on the annual income tax return

OR

Prelèvement Forfaitaire Libératoire’ scheme.


ANNUAL INCOME TAX RETURN

French Tax FormIf you declare your dividends annually on your annual French income tax return, they are granted a reduction of 40% in terms of the income tax calculation and at present UK dividends is not subject to income tax BUT this is likely to change shortly.

Some tax offices have even confirmed that they are classing UK dividends as French and therefore taxing them for income tax also.

The dividend (gross) is then subject to social contributions (15.5%).

PRELEVEMENT FORFAITAIRE LIBERATOIRE (PFL)

DividendsChanges to Dividends

Alternatively, you can declare the dividends under the ‘prelevement forfaitaire liberatoire’ (Changes to Dividends ) scheme in France.

This means that you have to complete a form (2778-DIV) which has to be submitted 15 days after receiving the dividend along with any payment due to your relative tax office. This uses the gross amount and does not award any deduction. On the gross amount, you are taxed 21% AND social contributions in addition at 15.5%.

This payment made is taken into account when completing the annual income tax declaration and the dividend amount is included BUT it will not be subject to further income taxation but used to give a global overview of your income received to determine the RFR (Revenu Fiscal de Réference) which determines any reductions and credits you could benefit from depending upon your household (foyer fiscal) and overall taxable income.

There has been some discussion that the PFL option was obligatory IF your RFR was 50.000 € for a single person or 75.000 € for a married couple BUT this is not the case as if your dividend is from a foreign (European source) then this rule does not apply to you and you can opt for either scheme, whichever being the most beneficial to you.

The main point is to determine, upon receiving the dividend whether to declare it immediately (within 15 days) under the PFL taxation method OR if it should be declared solely on the income tax return and benefit from the 40% reduction, reliant upon which is the most beneficial taxation scheme for you.

As previously stated, this ruling is not widely used for foreign dividends and in France every tax office varies in its interpretation of the rules, especially when foreign income is involved.

Based on the information received and researched to date, it would be possible to give an approximation of tax to pay either:

As a global overview of income tax and social contribution liability based on annual income from all sources, including the dividends imply the dividend to compare with the PFL scheme.

OR

Upon a certain dividend sum being received and the question of whether you would pay more tax under declaring the monies under the annual return or the PFL and which option to take.

I have provided two examples based on a gross dividend being received of 50 000.00 € and you can see that there is not a huge difference.

The advantage of the PFL is that you would have already paid tax on it upon completion of the income tax return so your overall imposition could be lowered, but the disadvantage is that you would have to pay the tax immediately upon completion of the PFL.

If you are concerned by this issue and the taxation of foreign dividends then please don’t hesitate to contact me and I cano discuss your options with you to find out the best way to proceed, remembering that if you opt for the PFL, there is only a 15 day period before the form has to be completed and payment made.


‘Please note that this information is based and interpreted on the understanding on the current French laws and from information provided by the tax office. These rules are subject to change/interpretation and therefore ‘Your French Matters’ cannot accept any responsibility for any decision made from this document. This document is intended for information/guide purposes only’.

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