In France, investment taxation was greatly simplified in 2018 with the introduction of the Prélèvement Forfaitaire Unique (PFU), commonly known as the Flat Tax. Unlike your salary, which is taxed in progressive brackets, the PFU applies a fixed percentage: 30% until 2025 and 31,4% from 1 January 2026.
The PFU (31,4%) is made up of two inseparable components:
- Impôt sur le Revenu (IR): 12,8% that goes to the general state budget.
- Prélèvements Sociaux (PS): 18,6% from 2026 (previously 17,2%) earmarked to fund the social security system. (It would be worth memorising this percentage, because in France it is almost always charged — even inside tax-advantaged accounts. Some income stays at 17,2%: rental income, gains on real estate and Assurance Vie.)
The alternative: the Barème Progressif. Instead of the fixed 31,4%, you could choose to have your investment gains added to your salary and taxed at your progressive income-tax rate (plus the 18,6% social charges). This election applies to all your financial income for the year.
When would the Barème Progressif be worthwhile? It tends to be advantageous only if your total income is low enough that your income-tax (IR) bracket is 0% or 11%. If you have an average or high salary, the 31,4% Flat Tax would almost always be the more economical option.