Introduced in 2018, the "flat tax" - or prélèvement forfaitaire unique (PFU) - marked a turning point in French capital taxation.

Its principle: replace the progressive income tax scale with a fixed rate of 30 %, combining 12.8 % income tax and 17.2 % social security contributions.

The initial objective was twofold:

- simplify taxation of dividends, capital gains and financial products,

- and make France a more attractive place to invest and do business.

Seven years on, this apparent stability conceals a more nuanced reality.

The recent debates about a possible increase in the PFU to 36 % - which quickly evaporated - and the announcement of a tax on family holdings show that capital taxation remains an unstable political lever.

In other words, the PFU is not a sustainable tax haven, but a delicate balance between competitiveness and budgetary efficiency.

Income actually concerned

The PFU applies to most capital income:

- dividends distributed to company shareholders or managers,

- interest and bond income,

- capital gains on securities (shares),

- and since the Loi Pacte, gains from the sale of crypto-assets.

At first glance, its fixed rate of 30 % seems attractive.

But for an executive who receives dividends from a company subject to corporation tax (IS at 25 %), the cumulative tax burden actually climbs to almost 47 % - a net yield lower than one might imagine.

The illusion of simplicity

The PFU is presented as an alternative to the progressive scale, but it does not take into account threshold effects or social charges avoided by certain managers.

Many self-employed people opt for dividends, thinking they'll "pay less", when in fact, once they've taken into account corporation tax, social security contributions and non-deductible CSG, the difference between dividends and conventional remuneration almost disappears.

In other words: flat tax simplifies the calculation, not the actual tax burden.

A façade of fiscal stability

Since 2018, the PFU has provided a clear and predictable framework.

But recent political signals, such as the planned increase to 36 %, taxation of wealth holding companies and the debate on the progressive nature of capital, are a reminder of the obvious: nothing is ever set in stone.

The French experience shows that capital taxation is often used as an adjustment variable in tight budgetary times.

Anticipate rather than suffer

Managers, the self-employed and investors should approach the PFU not as a given, but as a temporary window of opportunity.

Anticipation options are available:

- Holding company to smooth dividend distribution;

- Legal foreign structure (UK LTD, Portuguese LDA, US LLC) to diversify tax base;

- Wealth reorganization through reinvestment or controlled transfer.

The key is to choose your tax system before the government chooses it for you.

Concrete impact for managers and investors

- SME managers: the PFU remains competitive for moderate dividends, but loses its appeal once the company exceeds certain profit thresholds.

- Incorporated self-employed (SASU, EURL): it's best to rethink the balance between remuneration and distribution.

- Individual investors: flat tax remains attractive on paper, but its real net return depends on the legal structure used.

In short, the flat tax is not a privilege: it's a fragile window of balance that must be exploited intelligently while it exists.

The 30 % flat tax has given French entrepreneurs some breathing space, but its future is uncertain.

Between the announced taxation of family holdings and growing budget constraints, capital is once again a political target.

It's time to think ahead.

Not by seeking to evade tax, but by structuring your income and assets using the right legal tools, in France or abroad.

This article is taken from WizeCounsel's strategic guide to changes in capital taxation and the wealth structuring levers available to managers, the self-employed and investors.

The complete guide presents a detailed analysis of possible scenarios for the evolution of the PFU, quantified impacts on dividends, capital gains and crypto-assets, as well as legal structuring solutions applicable in France and internationally.

To receive a PDF version of the complete guide, simply send a request to request directly on our website

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