Flat Tax: Simplicity and Efficiency

The flat tax was designed to simplify capital taxation. It applies automatically, without complex calculations, at a single rate of 30%:

• 12.8% income tax,
• 17.2% social contributions.

For a director who pays themselves dividends from an English LTD or a company in Bulgaria, this is often the default option in France. The flat tax offers the advantage of clear visibility: you know exactly how much you will pay, regardless of the amount.

Progressive Tax: Flexibility and Allowances

The progressive income tax scale remains an alternative. In this case, your dividends and capital gains are added to your other income (salaries, profits, pensions). Taxation then depends on your marginal tax bracket (from 0% to 45%).

However, the main advantage lies in the 40% allowance on dividends. Specifically, if you receive €10,000 in dividends, only €6,000 will be taxed.

For taxpayers with modest or average incomes, this mechanism can prove more advantageous than the flat tax.

Comparison between Flat Tax and Progressive Scale

Flat Tax (PFU) at 30%

• Rate: 12.8% tax + 17.2% social contributions = 30%
• Application: Automatic
• Dividends: Fully taxed at 30%
• Clarity: Very simple, no complex calculations
• Potential optimization: Low

Progressive Scale with 40% Allowance

• Rate: From 0% to 45% depending on the tax bracket
• Application: Upon express option of the taxpayer
• Dividends: 40% exempt before applying the scale
• Clarity: More complex, depends on overall income
• Potential optimization: More advantageous for low to average incomes

When is the flat tax more advantageous?

The flat tax is beneficial for:

• Taxpayers with high incomes who would be taxed in the higher brackets (41% or 45%).
• Those seeking simplicity, without simulations or calculations.
• Directors who receive significant dividends from their foreign companies (for example, a company abroad in Ireland or a US LLC).

When to choose the progressive tax?

The progressive tax may be more advantageous when:

• Your overall income remains in the lower brackets.
• You benefit from the 40% allowance on your dividends.
• You combine salaries, dividends, and other income that places you below an effective 30% tax rate.

For example, a consultant who receives €20,000 in dividends via an LLP or an LTD may pay less than with the flat tax, if their overall income remains modest.

Conclusion and Recommendations

The choice between flat tax and progressive tax is not trivial. The flat tax appeals with its simplicity and protects high earners from excessive taxation. The progressive scale, on the other hand, can be optimized by the allowance and sometimes proves more advantageous for average incomes.

In practice:

• If your income is high and regular → the flat tax remains the best option.
• If your income is low or irregular → the progressive scale deserves consideration.

At service-societe.com, we support our clients in their decision-making: choice of jurisdiction, dividend taxation, impact of tax residence, and distribution strategy.