ReunionTax Obligations Detailed

Employers in Reunion have various tax obligations, primarily governed by French regulations due to Reunion's status as an overseas department.

Income Tax

Employers withhold income tax from employees' salaries according to a progressive system where higher earners pay a higher percentage. These withholdings are submitted to the French tax authorities, and the specific rates and brackets are adjusted annually.

Social Security Contributions

• Employer Contributions: Employers contribute approximately 45% of the employee's gross salary to social security, covering healthcare, pensions, unemployment insurance, and family allowances. The exact rate can vary based on the industry and specific company circumstances.
• Employee Contributions: Employees contribute between 20% and 23% of their gross salary for similar benefits. These contributions are deducted directly from their salaries.

Value Added Tax (VAT)

The standard VAT rate in Reunion is 8.5%.

Payroll Tax

Employers not subject to VAT and employing staff in mainland France or overseas departments pay payroll tax. It's calculated on annual remuneration using a progressive scale. The 2025 thresholds for this scale are pending the publication of the 2025 budget law. If the annual payroll tax is below €1,200, simplified procedures may apply. For annual tax payments under €4,000, an annual declaration is due before January 15 of the following year, using form 2502-SD electronically.

Other Taxes

• Apprenticeship Tax: Applicable to companies based on their total payroll.
• Professional Training Tax: Applies to businesses exceeding a specific size threshold.

Tax Deadlines and Payment Schedules

Tax deadlines for social security contributions and income tax withholding are generally monthly or quarterly, depending on the company’s size and tax liability. Refer to official French tax resources for detailed information and up-to-date specifics.

Additional Considerations for Businesses in Reunion

• Tax Incentives: Reunion may offer particular tax benefits for businesses, such as allowances for company directors. It's advisable to research or consult with a tax professional to understand these potential advantages.
• Labor Laws: Understanding Reunion's labor laws, including annual leave, public holidays, and workweek regulations, is crucial for compliance. These factors can impact payroll calculations and tax obligations.

It is important to note that this information is current as of today, February 5, 2025, and might be subject to changes based on updated regulations or future announcements. Consulting official French government websites or tax professionals is recommended for the most accurate and up-to-date guidance.

Employee tax deductions in Reunion follow the French tax system as the island is considered a part of France for tax purposes. This includes income tax, social security contributions, and value-added tax (VAT).

Income Tax

Income tax is levied based on the employee's taxable income, determined by their salary and applicable deductions. The tax rates are progressive, with higher earners facing higher tax rates. Tax returns are typically filed annually.

Social Security Contributions

Social security contributions are mandatory for both employers and employees. These contributions fund healthcare, pensions, unemployment insurance, and family allowances.

Employer Contributions

Employers contribute approximately 45% of the employee's gross salary toward social security. The exact percentage may differ based on the specific industry and company circumstances.

Employee Contributions

Employees contribute between 20% and 23% of their gross salary, deducted directly from their paychecks.

Value Added Tax (VAT)

The standard VAT rate in Reunion is 8.5%, applied to most goods and services. Some essential goods and services may have reduced VAT rates or exemptions.

Other Deductions

Additional deductions may include those for pension plans, union dues, and other voluntary deductions. As Reunion follows the French system, specific regulations regarding deductions, deadlines, and procedural requirements align with those established in mainland France.

In Réunion, the Value Added Tax (VAT), locally known as Taxe sur la Valeur Ajoutée (TVA), is a consumption tax applied to goods and services.

VAT Rates

• Standard Rate: 8.5% (most goods and services)
• Reduced Rates: 2.1% (accommodation, transport, catering, basic necessities, etc.), 1.75% (miscellaneous items), and 1.05% (the press).
• Telecommunication, Broadcasting, and Electronically Supplied Services (TBE): Rates vary depending on the type of service, with most falling under the standard 8.5% rate. For instance, ebooks and audiobooks are at 2.1% and electronic periodicals at 1.05%.

Registration Thresholds

Businesses involved in supplying goods in Réunion are generally required to register for VAT if their annual turnover exceeds EUR 82,200. For businesses supplying services, the threshold is EUR 32,900. Some exceptions may apply.

Filing and Payment

VAT returns and payments are typically filed and paid quarterly, with deadlines falling one month and seven days after the end of each quarter. Businesses with specific arrangements may be required to file monthly.

Exempt Goods and Services

Certain goods and services are exempt from VAT in Réunion, including rice and specific products related to the hotel and tourism industry. Exports of goods and services outside the European Union are also generally zero-rated.

VAT Refunds

Tourists may be eligible for VAT refunds on certain purchases made in Réunion. The manual process involves getting the VAT refund form stamped by French Customs and then sending it to the retailer. An electronic stamping system, called PABLO, is also available, offering a fully computerized process.

It's important to note that the information provided here is current as of February 5, 2025, and may be subject to change. For the most up-to-date information, consulting official sources or tax professionals is recommended. More specific details about procedures, eligible goods, and documentation requirements can be obtained from the French tax authorities.

Reunion Island's tax landscape offers a unique advantage for businesses engaged in Research and Development (R&D).

Research and Development (R&D) Tax Credit

The Research Tax Credit in Reunion Island stands out as one of the most favorable within the Organisation for Economic Co-operation and Development (OECD). This makes the island an attractive location for companies investing in innovation.

• Credit Rate: A significant 50% credit is applicable for eligible R&D expenditures up to €100 million. Expenditures beyond this threshold qualify for a 5% credit. This two-tiered system encourages both large-scale and smaller R&D investments.

• OECD Comparison: The Reunion Island R&D tax credit scheme positions it as a leader in incentivizing research and development activities among OECD countries. This reinforces its appeal to companies seeking optimal tax benefits for their innovation investments. Additional Tax Incentives information (as of February 5, 2025): While the sources focus on the R&D credit, it's worth noting that tax incentives can change. Always consult with local authorities or tax professionals for the most up-to-date information on other potential tax benefits in Reunion Island, such as those related to specific industries, investments, or employment initiatives. Information may also be available on the official websites of the French government or the regional council of Reunion.