Reunion, as an overseas department of France, operates under the French tax system, albeit with certain local adaptations and specificities. Employers and employees in Reunion are subject to French tax regulations concerning income tax, social security contributions, and payroll taxes. Navigating these obligations requires a clear understanding of the applicable rates, calculation methods, and reporting procedures mandated by the French tax authorities (Direction Générale des Finances Publiques - DGFiP) and social security bodies.
Compliance with these regulations is crucial for both local and international companies operating in Reunion. Employers are responsible for calculating, withholding, and remitting various taxes and social contributions on behalf of their employees, while employees are subject to income tax on their earnings and benefit from specific deductions and allowances. Staying informed about the latest tax laws and deadlines for 2025 is essential for ensuring accurate payroll processing and avoiding penalties.
Employer Social Security and Payroll Tax Obligations
Employers in Reunion are required to contribute to various social security schemes covering health insurance, pensions, unemployment, family allowances, and other risks. These contributions are calculated based on employee gross salaries, often up to certain ceilings (plafonds). The rates and ceilings are set annually at the national level but apply in Reunion.
Key employer contributions typically include:
- Health Insurance (Assurance Maladie): Covers healthcare costs.
- Pension (Assurance Vieillesse): Funds retirement pensions. There are basic and supplementary schemes.
- Unemployment Insurance (Assurance Chômage): Provides benefits to unemployed individuals.
- Family Allowances (Allocations Familiales): Supports families with children.
- Occupational Accidents and Diseases (Accidents du Travail et Maladies Professionnelles): Varies based on the company's activity sector and risk level.
- Other contributions: May include contributions for professional training, housing aid, and specific sector-based funds.
Contribution rates are subject to change annually. For 2025, employers should refer to the official rates published by URSSAF (Union de Recouvrement des cotisations de Sécurité Sociale et d'Allocations Familiales), the body responsible for collecting social contributions. Rates are generally applied to different portions of the salary (e.g., full salary, salary up to the social security ceiling).
| Contribution Type | Employer Rate (Indicative) | Basis of Calculation |
|---|---|---|
| Health Insurance | ~7.0% - 13.0% | Full Salary |
| Basic Pension | ~8.5% | Salary up to Ceiling |
| Supplementary Pension (AGIRC-ARRCO) | Varies by bracket | Salary up to/above Ceiling |
| Unemployment Insurance | ~4.05% | Salary up to 4x Ceiling |
| Family Allowances | ~3.45% - 5.25% | Full Salary |
| Occupational Accidents | Varies | Full Salary |
Note: These rates are indicative and subject to change for 2025. Specific rates depend on salary level, sector, and company size.
Employers are also responsible for specific payroll taxes, such as the contribution sociale généralisée (CSG) and contribution au remboursement de la dette sociale (CRDS) on certain types of income, although the primary burden of these falls on the employee.
Income Tax Withholding Requirements
France operates a Pay As You Earn (PAYE) system, known as Prélèvement à la Source (PAS), which applies in Reunion. Employers are required to withhold income tax directly from employee salaries each month. The amount of tax withheld is based on a tax rate provided by the DGFiP for each employee.
The tax rate communicated by the DGFiP is personalized based on the employee's household situation, income from the previous year, and any deductions or tax credits they are eligible for. Employees can opt for a non-personalized rate based solely on their salary, but this may result in under or over-withholding compared to their final tax liability.
Employers receive the applicable tax rate for each employee via the monthly social declaration (DSN). They apply this rate to the employee's net taxable income (gross salary minus employee social contributions and certain deductions) to calculate the monthly withholding amount. This amount is then remitted to the tax authorities.
If an employee's tax rate is not available (e.g., new employee), the employer must apply a default non-personalized rate based on the monthly salary level. This default rate is progressive, increasing with higher income brackets.
Employee Tax Deductions and Allowances
Employees in Reunion are subject to income tax on their net taxable income. Several deductions and allowances can reduce an employee's taxable income or the amount of tax due.
Common deductions and allowances include:
- Standard Professional Expense Deduction (Déduction forfaitaire pour frais professionnels): A standard deduction of 10% of salary is automatically applied, with a minimum and maximum limit. This is intended to cover typical work-related expenses.
- Actual Professional Expenses (Frais réels): Employees can opt to deduct their actual, documented professional expenses if they exceed the 10% standard deduction. This can include costs for transport, meals, and documentation, subject to specific rules and limits.
- Certain Social Contributions: Employee contributions to mandatory social security schemes (health, pension, unemployment) are generally deductible from gross salary for income tax purposes.
- Specific Allowances: Certain allowances or benefits provided by the employer may be partially or fully exempt from income tax under specific conditions (e.g., meal vouchers up to a certain limit, transport allowances).
- Tax Credits and Reductions: Employees may be eligible for various tax credits or reductions based on their personal situation (e.g., childcare costs, donations, energy-saving home improvements), which are typically claimed in their annual income tax return rather than impacting the monthly withholding rate directly, although they influence the personalized rate provided by the DGFiP.
The final income tax liability is calculated annually by the DGFiP based on the employee's total income from all sources, their household situation (using the quotient familial system which divides income by the number of family parts), and applicable tax brackets and credits.
Tax Compliance and Reporting Deadlines
Employers in Reunion must comply with strict reporting requirements and deadlines for both social security contributions and income tax withholding. The primary reporting mechanism is the Déclaration Sociale Nominative (DSN).
- Monthly DSN: Employers must submit a monthly DSN for all employees. This declaration reports salary data, social contributions due, and the income tax withheld (Prélèvement à la Source). The DSN is typically due by the 5th or 15th of the following month, depending on the company's size and payment schedule.
- Payment of Contributions and Withheld Tax: Social security contributions and withheld income tax must be paid to the respective bodies (URSSAF for social contributions, DGFiP for income tax) by the same deadlines as the DSN submission.
- Annual Reporting: While the DSN largely replaces previous annual declarations, employers still have obligations related to providing employees with annual tax summaries (similar to a P60 in the UK or W-2 in the US) detailing their total income, contributions, and tax withheld for the year.
Employees are required to file an annual income tax return (Déclaration des Revenus) typically in April/May of the year following the income year. This declaration reports all income received, allows for claiming deductions and credits, and enables the DGFiP to calculate the final tax liability, adjusting for the amount already withheld via the PAS system.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Reunion are subject to the same general tax rules as French nationals and companies, but with some specific considerations:
- Tax Residency: An individual's tax obligations in Reunion depend on their tax residency status. Generally, individuals are considered French tax residents if their main home is in France (including Reunion), they spend more than 183 days in France during a calendar year, or their principal economic activities are in France. Non-residents are typically only taxed on income sourced in France.
- Double Taxation Treaties: France has a network of double taxation treaties with many countries. These treaties aim to prevent individuals and companies from being taxed twice on the same income and may affect where income is taxed and at what rate. The provisions of a relevant treaty would apply to foreign workers or companies from treaty countries.
- Social Security Coordination: For foreign workers from the EU/EEA/Switzerland, EU regulations on social security coordination apply, potentially allowing them to remain subject to their home country's social security system for a limited period (posted workers). Bilateral social security agreements exist with some other countries. For workers from countries without such agreements, contributions to the French system are generally mandatory.
- Permanent Establishment: A foreign company operating in Reunion may be deemed to have a permanent establishment (PE) if it has a fixed place of business or conducts activities exceeding a certain threshold. If a PE exists, the profits attributable to the PE are subject to French corporate income tax. Employing staff locally can be a factor in determining PE status.
- Specific Regimes: While mainland France has specific tax regimes for impatriates (inward-bound foreign workers), the applicability and specifics of such regimes in Reunion should be verified, as local adaptations may exist or certain national schemes might not fully apply or have regional variations.
Foreign companies employing staff in Reunion, even without a PE, must register as employers with the relevant French authorities (URSSAF, tax office) and fulfill all employer obligations regarding social contributions and income tax withholding. Utilizing an Employer of Record service can simplify compliance for foreign companies by handling payroll, tax, and social security obligations locally.
