Accredited French tax representative for withholding taxes – administrative burden for American and Canadian companies
With the introduction of the ‘PAS – prélèvement à la source’ in 2019, employers are obliged to withhold the employees personal wage taxes via the French payslip.
With employers now being the collector of the withholding tax, companies are required to meet several conditions such as holding a B2B SEPA bank account. For certain foreign companies the introduction of the withholding tax system in France did come with an additional administrative (and financial) burden. To be compliant, they must appoint a French tax representative accredited by the French tax authorities. The French tax representative will then handle payments on their behalf.
Many companies are exempt from this obligation. Unfortunately, among the countries that are concerned are the USA and Canada.
When to appoint an accredited French tax representative
This obligation mainly concerns companies that act as foreign employers with employees in France (‘ESEF’-Status). Under this arrangement the foreign employer is the official employer. This differs from an employer of record which is essentially a local French employer with a local bank account.
However, not all foreign employers are concerned by the obligation to appoint a certified tax representative. Exemptions apply to companies established:
– in the EU,
– in a State which has signed an administrative assistance agreement with France to combat fraud and tax evasion and a mutual assistance convention for the recovery of taxes.
Among the countries that have signed such an agreement are: South Africa, Australia, Japan, Norway, New Zealand, United Kingdom of Great Britain and Northern Ireland.
To conclude, among the countries that are obliged to appoint a certified French tax representative are the USA, Canada, Switzerland and China.
With the obligation to appoint an accredited tax representative, the French government aims to combat tax fraud. The tax representative will not only take over the administrative part of handling payments on behalf of the foreign employer. The representative will actually become liable for the payment of the withholding tax.
Payment of withholding tax through B2B SEPA account
The only authorized payment method of the withholding tax is direct debit, through a B2B SEPA bank account. With a SEPA B2B direct debit any right for the debtor to reimbursement of authorized transactions is excluded, unlike a standard SEPA direct debit for which the debtor has a rejection period, usually of several weeks.