Intended to modernise the collection of the income tax without changing the rules of calculation, the planned withholding tax system in France (prélèvement à la source de l'impôt sur le revenue) will be effective on 1st January 2019 instead of 1st January 2018 as initially expected.
These additional 12 months will allow the government to finalise the new tax system and help the taxpayers and companies to get a better understanding of what they should expect next year as well as begin adapting to this change. Taxpayers will be informed for the first time about their future tax rate when they submit their next income tax declaration on line, which means in spring 2018. Those still using the paper format of the declaration will only be informed when they receive their tax returns during summer 2018.
Taxpayers will then be able to get more familiar with this new system thanks to simulations that can be done on their pay rolls at the end of the year 2018 using the real tax rates. By this way, they will know in advance the amount that will be deducted from their salary in January 2019.
There should also be some arrangements for companies to reduce their workloads and they should be in line to recover the tax rates of their employees earlier. This will help avoid using the neutral tax rate for everybody. This neutral rate can be used for people who do not want to communicate their real tax rate to their employer. Also, the penalties in case of a problem to issue the declaration should be reduced. During 2018, all companies should receive an explanation guide to the different steps in this new process.
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