Taxation of dividends in 2026: PFU, scale, social levies

Updated 12 May 2026. France's flat tax (prélèvement forfaitaire unique, or PFU) of 30% remains the default regime applicable to dividends paid to individuals tax-resident in France. Yet four situations upend this headline rate and require a careful reading of the mechanism: the global election for the progressive scale with the 40% allowance under Article 158-3-2° of the French Tax Code (CGI), the status of majority manager of a SARL which triggers self-employed social contributions (TNS) above 10% of capital, the quality of corporate beneficiary opening the parent-subsidiary regime under Articles 145 and 216 CGI, and finally the status of non-resident subject to withholding tax under Article 119 bis CGI. At Cabinet Hayot Expertise in Paris, we see too many directors reason on "30%" when the effective burden can range from 1.25% to 70%.

Composition of the PFU — 12.8% income tax + 17.2% social levies#

The PFU, codified in Article 117 quater CGI for the income tax portion and supplemented by Article L136-7 of the Social Security Code for the social portion, applies a 30% overall rate to the gross dividend received. This rate breaks down into two layers: 12.8% income tax and 17.2% social levies. The social levies themselves combine CSG (9.2%), CRDS (0.5%) and the solidarity levy (7.5%). On €100 of gross dividend paid to a resident individual shareholder, the net in hand is €70.

The 12.8% withholding advance#

The distributing company withholds an income tax advance of 12.8%, payable to the tax authority via form 2777 within the first fifteen days of the month following payment. The 17.2% social levies are also withheld at source simultaneously. This advance is creditable against the income tax ultimately due for the following year: it functions as a refundable tax credit. If the shareholder subsequently elects the scale and the calculation results in lower taxation, the surplus is refunded by the tax authority.

Advance exemption based on household reference income#

Article 117 quater CGI opens an exemption from the 12.8% advance for low-income households: the household's reference income (RFR) of year N-2 must be below €50,000 for a single filer or €75,000 for a married couple filing jointly. The exemption request must be submitted to the distributing company before 30 November of year N-1, on the basis of the tax notice produced. Failing this, the advance is withheld and reconciled the following year. For a director who modulates compensation across years, this exemption can represent a significant cash benefit.

40% allowance under Article 158-3-2° CGI#

By a global election made in box 2OP of the 2042 income tax return, the shareholder may waive the PFU and submit all investment income to the progressive income tax scale. The main benefit: the 40% allowance provided by Article 158-3-2° CGI applies to the gross dividend before scale calculation. However, this allowance is open only if dividends originate from companies headquartered in the EU or EEA and that have duly resolved on the distribution. Dividends paid in breach of bylaws or outside an assembly decision are not eligible. To this allowance is added the partial deductibility of CSG, at 6.8% under Article 154 quinquies CGI, on income for the following year.

Global and irrevocable nature of the election#

The scale election, made in box 2OP, has two crucial features: it is global — meaning it applies to all investment income and capital gains of the tax household for the year concerned, with no possibility to mix PFU on some items and scale on others — and it is irrevocable for the year declared. By contrast, the election binds only the year concerned: a household may elect the scale in N and revert to the PFU in N+1, depending on the evolution of its income and marginal tax bracket. This annuality justifies arbitration each year in light of income projections.

Tipping thresholds by marginal tax bracket#

On €100 of gross dividend, the comparative calculation guides the decision. At PFU, the net is €70. At the scale with a marginal tax rate (TMI) of 11%, the calculation gives: €100 − [0.11 × (€100 − €40)] − €17.2 = €76.2 net (the deductible CSG further improves the result the following year), i.e. a gain of about €6. At 30% TMI, the net falls to about €64.8: the PFU becomes more favourable. At 41% or 45%, the scale is markedly unfavourable. The economic tipping threshold therefore lies in practice for households whose marginal bracket is capped at 11%, and more rarely at 30% depending on total income and the impact of family quotient. For the full arbitration between dividends and compensation, see our analysis on executive compensation optimisation.

The 10%-of-capital rule (Article L131-6 CSS)#

Article L131-6, III of the Social Security Code has imposed, since 2013, a formidable rule: the fraction of dividends (and shareholder current-account interest) paid to a majority manager of a SARL exceeding 10% of share capital, share premiums and the sums in current account held by the manager, is integrated into the base of self-employed (TNS) social contributions. The 10% threshold is calculated on the manager's pro rata share: a manager holding 60% of a €50,000 share capital can therefore receive up to €3,000 of annual dividends (10% × €30,000) without triggering social contributions. Beyond that, contributions apply.

TNS contributions on the excess fraction#

On the excess fraction, the overall rate of TNS contributions (self-employed social security, mandatory supplementary pension, invalidity-death, family allowances, CSG-CRDS) ranges in practice from 45% to 50% of the net base. Combined with the 12.8% PFU income tax portion (social levies no longer apply, replaced by TNS contributions), the total levy can reach 58% to 65%. Excess dividends thus lose all tax attractiveness: they are loaded socially before income tax, exactly like additional compensation.

SARL vs SAS comparison on the same distribution#

The rule applies neither to SAS nor SASU. The president of a SAS, treated as an employee under the general regime, receives dividends without subjection to social contributions — whatever the amount. For €50,000 of dividends distributed to a director holding 60% of a SARL with €50,000 capital, the combined social and tax charge rises to about €35,000 (PFU + contributions on the excess fraction). The same distribution to a president of a SASU holding 60% of a SAS at the same capital costs €15,000 (PFU at 30%). The €20,000 gap on a single distribution explains why the choice of legal form remains structural. To dig into envelope arbitrations, see our brief on holding companies and tax optimisation.

Parent-subsidiary regime under Article 145 CGI#

When the dividend is paid to a company subject to corporate tax and holding at least 5% of the capital of the distributing subsidiary, the parent-subsidiary regime under Articles 145 and 216 CGI allows 95% of the dividend received to be exempted from corporate tax. Only a 5% share of expenses and charges remains taxable at the standard 25% corporate tax rate. The effective levy is therefore 5% × 25% = 1.25% of the gross dividend. The mechanism avoids economic double taxation in chain between subsidiary and holding, and remains one of the most powerful patrimonial levers in French law.

5% expense quota (1% under tax consolidation)#

Under the tax consolidation regime of Article 223 A CGI, the share of expenses and charges is reduced to 1% for dividends distributed between companies of the same consolidated group. The effective levy then falls to 1% × 25% = 0.25%. This regime however requires the prior constitution of a consolidated group, holding of at least 95% of the subsidiary, and formal election for five renewable financial years. Tax consolidation is a legal-structure topic in its own right, dealt with in depth in our dedicated article on holding companies and tax optimisation.

Holding conditions and conservation commitment#

The parent-subsidiary regime requires two cumulative conditions: holding of at least 5% of the subsidiary's capital (in full ownership or in bare ownership) and a commitment to retain the securities for two years. Early breach of the commitment triggers retroactive forfeit of the regime, with tax claw-back and late-payment interest. Securities held for less than two years at the date of the first payment must be subject to a formal commitment. The legal form of the subsidiary is indifferent: SAS, SARL, eligible foreign EU/EEA company, or even corporate-taxed SCI under conditions.

Article 119 bis CGI and bilateral tax treaties#

Article 119 bis CGI provides for a withholding tax at the rate of 12.8% on dividends paid by a French company to a beneficiary tax-resident outside France. This rate was reduced from 30% to 12.8% in 2018 to align with the income tax portion of the PFU applied to residents. The withholding is operated and remitted by the French company at the time of distribution. Bilateral tax treaties signed by France (more than 120 currently in force) often reduce this rate to 5% or 15% depending on the country of residence and the quality of the beneficiary (individual, company, substantial participation). Application of the treaty rate is conditional on the production of a certificate of tax residence of the beneficiary before payment.

Non-cooperative states and territories (NCST) at 75%#

Article 187 CGI provides for an increased withholding tax of 75% on dividends paid to a beneficiary located in a non-cooperative state or territory within the meaning of Article 238-0 A CGI. The NCST list is reviewed annually by ministerial order and typically includes jurisdictions without tax information exchange (certain Caribbean and Pacific islands, etc.). The mechanism is deterrent in nature: it neutralises any interest in structuring a distribution to an opaque shareholder. Verifying the NCST list at the payment date is an unavoidable compliance step.

Reimbursement and foreign tax credit#

The non-resident beneficiary may claim from the French tax authority the reimbursement of the fraction of withholding tax exceeding the applicable treaty rate, on production of the residence certificate and required supporting documents. Symmetrically, a French resident receiving dividends from a foreign company generally benefits from a tax credit equal to the foreign withholding, creditable against French tax up to the treaty rate. Double taxation is thus neutralised. Foreign dividends must be declared in France at their gross amount (before foreign withholding), with mention of the tax credit on the 2047 return.

IFU 2561 and the 2042 return#

The French distributing company must send to each beneficiary a Unique Tax Statement (IFU, form 2561) before 15 February of the year following distribution. This document summarises the gross amount, the advance withheld, the social levies withheld and the taxable net income. The beneficiary reports these amounts in the 2042 return, boxes 2DC (dividends eligible for the 40% allowance) and 2CG (deductible CSG). The global election for the scale is ticked in box 2OP. Failing election, PFU taxation applies automatically.

Form 2777 and the advance#

The distributing company declares and pays the 12.8% income tax advance as well as the 17.2% social levies via form 2777, to be filed within the first fifteen days of the month following payment. Failure to file exposes the company to late-payment interest and a 5% surcharge on the sums due. For intra-group distributions between companies benefiting from the parent-subsidiary regime, no withholding is operated but the declaration is still required. Filing is done online via the company's professional tax account.

Articulation with French wealth tax (IFI) and foreign accounts#

Shares and corporate units held by an individual are not included in the base of the French real estate wealth tax (IFI), reserved for real estate assets since 2018. By contrast, units in corporate-taxed or income-taxed SCIs, SCPIs and OPCIs with a real estate focus enter the IFI base in proportion to their real estate component. Shareholders holding securities accounts abroad must also file each year a 3916 return per account opened. For a full picture of the reporting calendar, consult our memo on 2026 corporate tax filings.

The arbitration — PFU or scale depending on your situation#

In the files we handle in Paris, four profiles emerge. A single director in the 45% TMI bracket with €80,000 annual dividends has every interest in staying on the PFU: net in hand €56,000 versus €35,200 at the scale. A household at 11% TMI with low salary income and €20,000 of dividends gains €1,200 to €1,500 by electing the scale. A household at 30% TMI with average salary income sits in the fine arbitration zone: the decision depends on deductible CSG carried over to the following year, on the family quotient and on the overall income composition. Annual comparative calculation through your forecast return remains the only reliable method.

The underestimated risk — SARL dividends and retroactive TNS contributions#