Pay-As-You-Earn (PAYE) - Prélèvement à la Source
2025-02-23
- How PAYE Works
- Affected Individuals
- Advantages of the System
- Role of the Tax Administration
- FAQ
- References
The Pay-As-You-Earn (PAYE) system, known as “prélèvement à la source” in France is a method for collecting income tax that came into effect on January 1, 2019 . Its primary goal is to allow taxpayers to pay their tax close to the receipt of their income, without a one-year delay .
How PAYE Works
General Principle
The PAYE system modifies the payment methods for income tax. The tax is directly deducted from the employee’s salary or income by the employer or the third party paying the income (pension funds, etc.) . For employees, the tax appears as a line item deduction on their payslip, similar to social contributions .
Calculation of the Deduction Rate
The deduction rate is calculated by the tax administration based on the taxpayer’s last income declaration . This rate is then communicated to the employer or the paying entity, which applies it to determine the amount to be deducted each month .
Types of Rates
There are several types of deduction rates:
- Personalized Rate: calculated based on the household’s income
- Individualized Rate: for couples, allows the rate to be adjusted for each member
- Non-Personalized Rate: based on a scale, used by default if the tax administration does not have sufficient information
Affected Individuals
The PAYE system applies to most incomes:
- Employees: deductions made by the employer
- Self-employed: monthly or quarterly deductions in the form of prepayments
- Retirees: deductions made by the pension fund
- Rental income: monthly or quarterly deductions
Advantages of the System
- Immediate adaptation to changes in circumstances: the withheld amount adjusts automatically in case of changes in income .
- Simplification: the taxpayer receives their net income after tax .
- Better distribution of tax over the year: avoids the one-year delay between receiving income and paying tax .
Role of the Tax Administration
Despite this new system, the tax administration remains the sole contact for taxpayers regarding all questions related to income tax . The annual income declaration is still mandatory, allowing the final tax amount due to be calculated and necessary adjustments to be made .
In summary, the Pay-As-You-Earn (PAYE) system represents a major evolution in the French tax system, aimed at simplifying tax payment and adapting it more closely to the actual income of taxpayers.
FAQ
- What is PAYE? PAYE, known as “prélèvement à la source” in France, is a system for paying income tax that is deducted directly from your payslip.
- How does PAYE work for employees? For employees, tax is directly deducted from their salary by the employer. The amount appears as a deduction on the payslip, similar to social contributions.
- Who calculates the deduction rate? The deduction rate is calculated by the tax administration based on the taxpayer’s last income declaration. This rate is then communicated to the employer or the paying entity.
- Do I still need to file an income declaration? Yes, the annual income declaration remains mandatory. It allows the tax administration to calculate the final amount of tax due and to make necessary adjustments.
- How can I modify my deduction rate? You can request a modification of your deduction rate directly in your personal area on the website www.impots.gouv.fr if your situation changes during the year (changes in income or family situation).
- Does PAYE apply only to employees? No, PAYE applies to most income types: salaries, pensions, income from self-employment, rental income, etc. For incomes without a collector (like self-employed), prepayments are deducted directly from the bank account.
- What is the main advantage of PAYE? The main advantage is the immediate adjustment of tax to changes in circumstances. The amount deducted adjusts automatically in case of changes in income, allowing for a better distribution of tax throughout the year.
References
- [1] Le prélèvement à la source, comment ça marche?, Finances Publiques
- [2] Prélèvement à la source, L’Assurance retraite
- [3] Prélèvement à la source : Choisir et modifier son taux, Expert Impôts
- [4] Prélèvement à la source : définition, fonctionnement et montant
- [5] Quelles sont les différences entre les taux de prélèvement à la source proposés ? impots.gouv.fr
- [6] Prélèvement à la source : tout savoir
