TLDR: A foreign employer must apply the French prélèvement à la source (withholding tax) on French-source salaries paid to employees tax-resident in France, regardless of the employer’s location. If the employer is based outside the EU or in countries without tax assistance agreements with France, the obligation only applies if a tax representative is appointed in France.
General Withholding Tax Obligation
A foreign employer is required to apply the French prélèvement à la source on French-source salaries paid to employees who are tax-resident in France. This obligation applies regardless of whether the employer is based in France or abroad. The paid activity must be physically performed in France, and the employee must be a tax resident in France under Article 4B of the CGI (Code Général des Impôts).
Conditions for Applying Withholding Tax
The obligation to apply prélèvement à la source arises when:
- The salary compensates for work physically performed in France.
- The employee is a tax resident in France.
This principle applies regardless of the employer’s nationality or the currency of payment. The fact that the employer is based abroad does not exempt them from withholding tax, provided the income is French-source and the recipient is a tax resident in France.
Employers Based Outside the EU or in Non-Tax Treaty Countries
For employers based outside the European Union or in countries without tax assistance agreements with France, the obligation to apply prélèvement à la source only applies if the employer appoints a tax representative in France. This representative acts as an intermediary for tax compliance and must be accredited with the French tax authorities. The obligation does not apply to employers based in EU Member States or countries with equivalent administrative assistance agreements with France.
Exemptions and Special Cases
Salaries paid for work performed abroad by a foreign employer to employees tax-resident in France are not subject to withholding tax if:
- The expatriation period exceeds 183 days (or 120 days for specific activities under Article 81 A CGI) without losing tax residency in France.
- The period is shorter than these thresholds, and allowances for the stay abroad do not exceed 40% of the salary.
Foreign-Source Private Pensions
Foreign-source private pensions paid by a foreign employer to tax residents in France are subject to advance payments (acompte)—not withholding tax—if taxable in France under international conventions.
Exempt Foreign-Source Income
Income exempt from tax under international conventions is not subject to prélèvement à la source, while income eligible for a tax credit equal to the foreign tax is included in the scope of acompte.