Following a ministerial communiqué on June 7, 2017 and backing from the High Court (“Conseil d’Etat”), the government has now moved to officially delay implementation of the new income withholding tax system for one year. The new effective date is scheduled for January 1, 2019 instead of 2018. Accordingly, the “lost tax year”, giving rise to a tax credit essentially canceling out the tax on all but “exceptional income”, will be 2018 instead of 2017. The government decided to postpone implementation for one year in order to better facilitate implementation while not altering the underlying objectives. The government will conduct a review including participation on an experimental basis and an audit of the measures by an outside firm.
Concern had been expressed regarding the cost of implementing the new withholding tax, especially through the use of third-party service providers, and the impact that this could have on competitiveness and social relations. Once the experiments are completed, it is expected that the government will be in a better position to address those concerns and eventually adjust this monumental change to the tax collection process.