The net profit distributed to shareholders is a dividend. Once reported, it is subject to income tax, as well as to social contributions in rate of 15.5 percent. In addition, a withholding tax of 21 percent applies at the payment date of the dividend, as well as on the income tax paid the following year.
As calculated starting from January 1, 2013, the taxation of dividends was revoked, as such, dividends received in 2013 are taxable based on the income tax scale. In regards to the advance payment, the 21 percent rate applied as tax deducts from the income tax.
When it comes to social security contributions, as dividends represent income from assets, they are subject to five social security deductions at source and the total tax leads to a 15.5 percent rate in 2012. However, in 2013, the rate of the general social contributions was reduced to 5.1 percent from 5.8 percent.
Starting with January 1, 2013, dividend income generated in France is subject to personal income tax at progressive rate. As such, the optional flat rate was abolished and it was replaced with a compulsory withholding tax. The tax return now needs to be filled in by the payer with the withholding tax as well as with the social security taxed no later than 15 days of the month following the month in which the income is received.
As for the rates, the rate of the compulsory withholding tax is 21 percent for dividends, but 24 percent for interest.
Since 2013, company directors who pay dividends to themselves are subject to the social security contributions and the company is charged. As such, the company is liable for self-employed social security contributions on dividend payment if company owners receive dividends worth more than 10 percent of the company’s capital. As such, if the capital of the company is 10,000 EUR, then the social security contribution applied at normal rate on dividends paid is worth 1,000 EUR. However, if the 10 percent rate is not exceeded, then the social charges are of 15.5 percent.
When it comes to investors, they are obligated to pay an withholding tax of 21 percent applied on the gross amount of dividends and the final payable amount is determined by the submission of the annual tax return. If the sum is higher than the tax due, then the investors receive a refund of the overpaid tax. In case it is less, then the marginal amount will be collected as part of the annual tax demand.