The non-discretionary flat-rate withholding tax already paid is an essential tax mechanism for taxpayers receiving income from movable assets. This system is part of a series of tax regimes and declarations, and requires a precise understanding to optimize your tax situation. You need to know how to declare and deduct these sums to avoid any errors in your annual tax return.

This guide explains how to effectively manage the flat-rate withholding tax already paid. You’ll discover the income concerned, the reporting obligations and the associatedtax optimization strategies.

What is the flat-rate withholding tax already paid?

The prélèvement forfaitaire non libératoire (PFNL) is an advance tax deducted at source from certain financial income. Unlike income subject to the withholding tax, this deduction does not release the taxpayer from his or her obligation to declare the income. You must declare this income in your annual tax return, where the amount deducted will be adjusted according to your actual tax situation.

The PFNL is applied automatically when income is actually paid into your account by banks, brokers and management companies. Introduced on January 1, 2018 as part of the prélèvement forfaitaire unique (PFU) tax reform, the standard rate is 12.8%. For example, for every €1,000 in dividends received, the establishment automatically deducts €128 in income tax. Added to this are social security deductions of 17.2%, bringing the total tax charge to 30% (€300 on €1,000). This amount represents an advance that will be adjusted when you file your tax return: if the deduction exceeds the tax actually due, you’ll get the overpayment back.

Taxpayers have the option of choosing the progressive income tax scale. This can be an advantage, depending on your marginal tax rate. The withholding already paid will then be deducted from the tax calculated according to the scale, with any surplus refunded.

Income covered by the flat-rate withholding tax (prélèvement forfaitaire non libératoire)

Income from movable capital is the main category subject to the PFNL. You are concerned if you receive dividends from French or foreign shares. Interest from term accounts and bonds is also included. However, you may qualify for exemption from the withholding tax if your reference tax income for the year before last is less than €25,000 for a single person, or €50,000 for a couple subject to joint taxation.

Capital gains realized on the sale of securities are subject to a flat-rate withholding tax. The 12.8% rate is automatically applied at the time of the transaction. Social security contributions of 17.2% are systematically added to this rate, bringing total taxation to 30%. This exemption must be expressly requested by the taxpayer from the paying institution before November 30 of the year preceding the year of payment.

Certain types of income are fully tax-exempt or benefit from special tax regimes. Income from regulated passbook savings accounts (Livret A, LDDS, LEP) is completely tax-exempt, and therefore not subject to the PFNL. Life insurance policies over 8 years old benefit from a special regime, with an annual allowance of €4,600 for a single person and €9,200 for a couple subject to joint taxation, before application of the levy. Beyond these amounts, the flat-rate withholding tax applies to gains.

How to declare the flat-rate withholding tax already paid

The PFNL is declared via your annual tax return on form 2042, generally between mid-April and early June, depending on your département of residence. You must enter the amounts in the specific boxes dedicated to income from transferable securities. Financial institutions will send you a single tax form (IFU) summarizing all income received and deductions made.

Boxes 2CK and 2BH of the 2042 form play distinct and complementary roles: box 2CK records the gross amount of income subject to the PFU, while box 2BH records the flat-rate deductions already paid during the year. Correct completion of these two boxes enables the tax authorities to accurately calculate the tax balance to be paid or refunded. If you opt for the progressive scale rather than the PFU, you must tick box 2OP, which may be advantageous depending on your marginal tax rate. You should check that the amounts declared by your establishments tally with those entered on your tax return, as an error could lead to a discrepancy in the calculation of your final tax liability.

Taxpayers whose reference tax income does not exceed certain thresholds can apply for exemption from withholding tax. This request must be made by providing a sworn statement to your paying institution before November 30 of the year preceding the year of income payment. This exemption must be renewed each year, and avoids a cash advance for low-income households. The tax authorities offer several types of tax return, depending on your situation. Online declarations make it easier for you to pre-fill in the data transmitted by third-party declarants. However, you remain responsible for checking the accuracy of the information.

Deduction from final tax liability

The flat-rate withholding tax already paid acts as a tax credit that can be deducted from your final tax bill. The tax authorities calculate your tax according to the system you have chosen (PFU or progressive scale), and then automatically deduct the deductions already made at source. To opt for the progressive scale, tick box 2OP on form 2042 when you file your tax return.

If you opt for the progressive scale, your taxable income includes all your income from securities. The calculation is based on your personal marginal tax rate. Lump-sum deductions paid during the year are deducted from the tax calculated according to this scale.

There are three possible situations when it comes to tax regularization. Let’s take a concrete example: you receive €5,000 in dividends, with a withholding tax of €640 (12.8%). If you are in the 11% bracket, your tax due is €550, generating a refund of €90. If your final tax liability is €750, you will have to pay an additional €110. In the event of perfect equality between withholding and tax due, no additional operation is required.

The refund mechanism is activated automatically when your tax return is processed, with a refund usually made within 2 to 3 months of validation. The Treasury will pay you the overpayment by transfer to your bank account or by cheque, depending on your registered details. This period may vary depending on the filing period and the complexity of your tax file.

Tax optimization and strategies with NTFP

Choosing between the PFU and the progressive scale requires a precise analysis of your marginal tax rate. Opting for the progressive scale is advantageous only for taxpayers in the 0% and 11% brackets. Above this threshold, the flat rate of 12.8% remains more favorable. A taxpayer in the 11% bracket thus saves 1.8 points on his or her income from transferable securities.

A tax optimization consultant can carry out a comparative simulation integrating all your income, deductible expenses and tax credits. This global analysis identifies the optimal system for your tax profile. The option for the tax scale must be ticked on the annual tax return, and applies to all household income.

Tax-free strategies in France are an effective complement to NTFP management. The timing of securities sales has a direct impact on your capital gains tax: spreading your transactions over several years smoothes the tax impact. Diversification between tax-exempt and taxable products optimizes your overall tax situation.

Three errors frequently compromise the effectiveness of the system: forgetting to declare levies already paid, failing to exercise the scale option before the deadline, and failing to keep IFUs. These failures result in double taxation, loss of tax savings and difficulties in the event of an audit.

Advance tax planning maximizes the benefits of NTFPs. Evaluate the appropriateness of opting for the progressive tax scale when you file your tax return. The support of a tax lawyer secures your choices and guarantees the compliance of your returns.

Exemption from withholding tax: conditions and procedures

Certain taxpayers may be exempted from the flat-rate withholding tax, subject to certain income conditions. This exemption is available when your reference tax income (RFR) is less than €25,000 for a single person, or €50,000 for a couple subject to joint taxation. To qualify, you need to follow a specific procedure:

1. Submit an affidavit to your paying institution (bank, insurance company, etc.)
2. Do this before November 30 of the year preceding the year of income payment.

It’s important to note that this exemption only avoids the cash advance that the withholding tax represents, but does not exonerate you from the obligation to declare it. Your income from marketable securities will still have to appear on your annual tax return, even if no withholding tax is levied.

This exemption is not permanent, and must be renewed each year if you continue to meet the income conditions. The main advantage is improved cash flow: instead of advancing 12.8% of the amount of your financial income and then waiting for the overpayment to be reimbursed, you immediately retain the full amount of your income until you pay your final tax bill.

Sample calculation: understanding the levy charge

To illustrate in concrete terms the mechanism for deducting the flat-rate withholding tax, let’s take the case of a taxpayer who receives €5,000 in dividends in 2024. Under the PFU, the withholdings break down as follows:
– 12.8% flat-rate withholding tax: €5,000 × 12.8% = €640
– 17.2% social security withholding tax: €5,000 × 17.2% = €860
– Total taxation: €1,500

Now let’s imagine that this same taxpayer is in the 11% marginal tax bracket and wishes to opt for the progressive scale. The calculation then becomes :

When the tax adjustment is made, the tax authorities will compare the flat-rate withholding tax already paid (640€) with the tax calculated according to the tax scale (550€). In this case, the taxpayer will benefit from a refund of €90 (€640 – €550), representing the overpayment in relation to his actual tax rate. This saving of €90 is in addition to the overall advantage of €90 (€1,500 – €1,410) obtained by choosing the scale rather than the PFU.

This example underlines the importance of carrying out a personalized simulation before choosing between the PFU and the progressive scale. For taxpayers with a marginal tax rate of less than 12.8%, the sliding scale option is generally more advantageous, while high-taxpayers will prefer the PFU. As each tax situation is unique, a detailed analysis is required to identify the optimum strategy.