Payroll tax in France: employers concerned, rates and returns
The payroll tax (taxe sur les salaires) is owed by employers established in France that are not subject to VAT, or only partly so. It is separate from social security contributions. Here is how to identify, calculate and file it.
What is the payroll tax?
The payroll tax is a tax borne by the employer on the remuneration it pays. It compensates, in a way, for the absence of recoverable VAT on the costs of employers whose activity is not, or not entirely, subject to VAT. It is declared to the tax authority, not to the Urssaf.
Who is liable?
Liable are employers established in France that pay remuneration and are not subject to VAT, or were not subject to VAT on at least 90% of their previous year’s turnover. Typical cases are associations, foundations, banks and insurers, medical professions or certain VAT-exempt activities.
For an EU company, the question arises if it employs staff in France, for example in an establishment, and its activity in France is VAT-exempt or partly exempt. See the article on permanent establishment.
Exempt employers
- employers under the VAT registration threshold (micro-entrepreneurs, for example);
- the State and certain public bodies;
- certain domestic-staff employers, agricultural employers or teaching institutions, under specific conditions.
Calculation: a progressive scale
The tax applies to each employee’s gross annual remuneration, under three rates for mainland France. Thresholds are revalued each year:
| Annual remuneration band (2025) | Rate |
|---|---|
| Up to €9,147 | 4.25% |
| €9,147 to €18,258 | 8.5% |
| Above €18,258 | 13.6% |
Reduced rates apply overseas. A reduction (“décote”) exists where the annual tax falls within a low range, and associations benefit from an allowance. As amounts are revalued, check the figures for the current year.
Returns and deadlines
The frequency depends on the previous year’s tax amount:
| Annual amount | Payments | Annual return |
|---|---|---|
| Below €4,000 | One annual payment, return 2502 before 15 January | Included in the 2502 filing |
| €4,000 to €10,000 | Quarterly (form 2501): 15 April, 15 July, 15 October | 2502 before 31 January |
| Above €10,000 | Monthly (form 2501) | 2502 before 31 January |
Payment must be made electronically. Source: payroll tax on Service-Public Entreprendre (in French).
Common mistakes
- Ignoring the tax because the company is foreign: the test is employing staff in France and the VAT regime.
- Miscalculating the VAT ratio, which determines liability.
- Confusing the base with net pay or with the social-contribution base.
- Paying late: see penalties and late-payment interest.
- Not filing the annual summary return.
How Hanoutax helps
Hanoutax, a tax mandatary acting under a written mandate, can analyse liability with you, prepare returns 2501 and 2502, monitor payment deadlines, check amounts and prepare a claim where there is an error (see tax relief and claims). The scope is set by the power of attorney with the tax authorities. For VAT, see VAT returns.
FAQ
Does a foreign company employing staff in France owe payroll tax?
It may if it is established in France and its activity is not subject to VAT, or not at least 90% so. It must be analysed case by case.
Does payroll tax replace social contributions?
No. It is a separate tax, declared to the tax authority, in addition to social contributions.
What are the rates?
Three progressive rates in mainland France: 4.25%, 8.5% and 13.6% depending on the annual remuneration band, with thresholds revalued each year.
When must I file and pay?
Depending on the previous year’s amount: annually, quarterly or monthly, with an annual 2502 return in January.
Can a VAT-registered company be liable?
Yes, if less than 90% of its previous year’s turnover was subject to VAT (partial liability).
Does Hanoutax run payroll?
No. We handle the filing and checking of the tax, from the remuneration data you send us.
Informational content, which does not constitute legal advice. The rules that apply depend on your situation.