What Is France’s PFU Flat Tax on Investment Income?

France’s Prélèvement Forfaitaire Unique, the flat tax on investment income known as the PFU, rose to 31.4% on January 1, 2026. That total combines a 12.8% income tax with 18.6% in social charges, and it applies to most dividends, interest, and capital gains on securities.¹ Several common French savings products fall outside it, and you can choose progressive taxation instead when that produces a lower bill.

What the 31.4% Rate Is Made Of

The PFU has two layers. The first is a flat 12.8% income tax that does not vary with your overall earnings. The second is a bundle of social charges totaling 18.6%: the Contribution Sociale Généralisée (CSG) at 10.6%, the CRDS at 0.5%, and the solidarity levy at 7.5%. The 2026 increase came entirely from CSG, which moved from 9.2% to 10.6% under the social security financing law for 2026, pushing the combined rate from 30% to 31.4%.¹

The two layers travel together. You cannot keep one and drop the other. Even when you opt for progressive income taxation, the 18.6% social charges still apply in full to your investment income.

Which Investment Income Falls Under the PFU

Article 200 A of the General Tax Code sets out what the PFU covers.² In everyday terms, it applies to three main categories.

Dividends and Interest

Dividends from French or foreign shares are taxed at the full 31.4% rate. So is interest from bonds, term deposits, and most bank savings products. Interest from a Plan d’Épargne Logement (PEL) or Compte Épargne Logement (CEL) opened on or after January 1, 2018, is subject to the PFU as well.³ PELs and CELs opened before that date keep their older, more favorable treatment.⁴

Capital Gains on Securities

Selling stocks, corporate bonds, mutual fund shares, or ETFs at a profit triggers the PFU on the net gain. Losses realized in the same year offset gains first; only what remains is taxed.

Cryptocurrency

Gains from selling cryptocurrency for fiat currency are taxed at the PFU rate when you trade as an occasional investor managing personal assets. Annual gains below €305 are exempt. If your activity crosses into professional territory — frequent, sophisticated trades using advanced tools — profits are instead taxed as non-commercial business income under a different regime.

What the PFU Does Not Cover

Several kinds of savings and income sit outside the flat tax entirely. Knowing where the boundary runs saves you from applying the wrong rate.

Livret A and LDDS: interest is fully exempt from both income tax and social charges.¹
Plan d’Épargne en Actions (PEA): gains inside the plan are exempt from income tax once the account has been open for at least five years, though the 18.6% social charges still apply at withdrawal.⁵
Rental income (revenus fonciers) follows the progressive scale or the micro-foncier regime.
Capital gains on real property have their own regime, with holding-period allowances that reduce tax over time.

How Assurance-Vie Is Taxed

Life insurance contracts run on a hybrid rule that favors long-term holders. For premiums paid after September 27, 2017, gains withdrawn in the first eight years are taxed at 12.8% income tax plus 18.6% social charges.

After the contract passes eight years, an annual tax-free allowance on gains kicks in: €4,600 for a single taxpayer and €9,200 for a couple filing jointly, pooled across all your assurance-vie contracts. Gains above the allowance are then taxed at a reduced 7.5% income tax rate, but only on the portion attributable to net premiums up to €150,000 total across your contracts. Gains linked to premiums above that threshold are taxed at 12.8%. Social charges of 18.6% apply to the full gain in every case, with no allowance.

Contracts holding premiums paid before September 27, 2017, follow an older tiered structure with higher early-year rates, but the same €4,600/€9,200 allowance and 7.5% rate after eight years.

Choosing the Progressive Scale Instead

You are not locked into the flat rate. When you file, you can opt for the progressive income tax scale (barème progressif) by checking box 20P on Form 2042.⁴ It is an all-or-nothing choice: every category of PFU-eligible income switches together for the year.

The progressive option carries two benefits the flat tax does not:

A 40% allowance on dividends before they enter the tax brackets. A €10,000 dividend becomes €6,000 of taxable income.
A partial CSG deduction: 6.8% of the CSG paid on investment income comes off your overall taxable income.⁴

The 2026 progressive brackets, applied per tax share, are:

Up to €11,600: 0%
€11,601 to €29,579: 11%
€29,580 to €84,577: 30%
€84,578 to €181,917: 41%
Above €181,917: 45%

The comparison is between 12.8% flat and your effective progressive rate on the investment income after allowances, since the 18.6% social charges apply either way. A taxpayer in the 11% bracket usually comes out ahead on the progressive side, especially on dividends where the 40% allowance drives the effective rate close to 6.6%. Anyone solidly in the 30% bracket or above generally does better with the flat rate.

Capital Losses

Losses on securities sales offset gains of the same type in the year they are realized. Any excess loss carries forward for up to ten years and can reduce taxable capital gains in later years. The carryforward works whether you use the flat rate or the progressive scale. Investment losses cannot offset wages or rental income.

High-Income Surcharges on Top of the PFU

Investment income taxed at the PFU still counts toward your reference tax income (revenu fiscal de référence). If that figure is high enough, two additional surcharges sit on top of the flat tax.

Contribution Exceptionnelle sur les Hauts Revenus (CEHR)

For single taxpayers, the CEHR is 3% on reference income between €250,000 and €500,000, and 4% above €500,000. For couples filing jointly, it is 3% between €500,000 and €1,000,000 and 4% above €1,000,000.

Contribution Différentielle sur les Hauts Revenus (CDHR)

Starting with 2025 income, France applies a minimum effective tax aimed at high earners whose overall rate falls below 20% because of flat-rate mechanisms and deductions. The CDHR applies when reference income exceeds €250,000 for singles or €500,000 for couples. If your combined income tax and CEHR, after adjustments, total less than 20% of your adjusted reference income, you owe the difference.⁶

Taxpayers subject to the CDHR must pay an advance equal to 95% of the estimated amount between December 1 and 15 of the tax year. For 2026 income, that advance is due in December 2026.⁶ The surcharge is particularly relevant when investment income taxed at 12.8% dominates your total, since that rate alone sits well under the 20% floor.

Withholding, Filing, and Refunds

The Advance Withholding

Your bank or broker deducts a 12.8% advance called the Prélèvement Forfaitaire Non Libératoire (PFNL) when investment income is paid. It is a deposit against your final income tax bill, not a separate tax. The 18.6% social charges are withheld at source as well.¹

Lower-income taxpayers can request an exemption from the 12.8% PFNL, though not from the social charges. Eligibility is based on your reference tax income from two years earlier:⁷

For interest: below €25,000 (single) or €50,000 (couple).
For dividends: below €50,000 (single) or €75,000 (couple).

Submit the exemption request to your financial institution before November 30 of the year before the income year. After that deadline, withholding will apply.

The Annual Declaration

Each year your bank sends an Imprimé Fiscal Unique (IFU) summarizing taxable interest, dividends, and capital gains for the prior year. The same data goes directly to the tax authorities, so most of your online return on impots.gouv.fr arrives pre-filled. Check every figure against the IFU and your own records, particularly for capital gains and for accounts across multiple institutions. Report investment income on Form 2042 and, where relevant, Form 2042-C. Opt for the progressive scale by checking box 20P.

Filing deadlines depend on your department. For 2026 (2025 income), the online deadlines are May 21 for departments 01–19 and non-residents, May 28 for departments 20–54, and June 4 for departments 55 and above.⁸

Refunds and Balances

Once your return is processed, the tax administration reconciles the PFNL withheld against your final liability. If the advance exceeds what you owe, you get a refund. If there is a balance due, you pay on the schedule shown on your assessment notice. Opting for the progressive scale after withholding was taken at the flat rate is a common reason for a refund at lower income levels.

Penalties for Late Filing or Payment

Filing late on your own initiative, before receiving a formal notice, adds a 10% surcharge to the tax owed. Filing within 30 days of a formal notice raises it to 20%. Beyond 30 days after the notice, the surcharge is 40%. Undisclosed activity discovered by the authorities carries 80%.

Late payment accrues interest at 0.2% per month (2.4% per year), running from the first day of the month after the payment was due through the last day of the month you pay. If the balance is still unpaid 45 days after the assessment date, an extra 10% penalty applies on top of the interest. Deliberate underreporting is treated as bad faith and carries 40%; fraud or abuse of law can reach 80%.

What US Taxpayers Should Know

US citizens and residents holding French investments deal with a second layer. France withholds tax on dividends paid to non-residents, and the treaty-reduced rate for individual US investors is 15% of the gross dividend.⁹ Claiming that reduced rate requires filing French Forms 5000 and 5001 through the paying institution.¹⁰

On the US side, both the 12.8% income tax and the 18.6% CSG and CRDS charges are eligible for the Foreign Tax Credit. The IRS previously questioned whether CSG and CRDS were creditable, but reversed course after 2019 diplomatic communications confirmed that these charges are not covered by the US-France Social Security Totalization Agreement.¹¹ Because they fall outside the totalization agreement, they qualify as creditable foreign taxes rather than social security contributions. Claim the credit on Form 1116.

1
Service-Public.fr. Income Tax – Savings and Investment Income
2
Legifrance. Article 200 A du Code General des Impots
3
Service-Public.fr. Housing Savings Plan (PEL)
4
Ministère de l’Économie. Comment Fonctionne le Prélèvement Forfaitaire Unique (PFU)
5
Autorité des marchés financiers. PEAs and PEA-PMEs – The Importance of the First Payment to Validate the Opening Date
6
Service-Public.fr. La Contribution Différentielle sur les Hauts Revenus Est Maintenue
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Direction générale des Finances publiques. Puis-je Beneficier d’une Dispense du Prelevement Forfaitaire Non Liberatoire
8
Service-Public.fr. Quelle Est la Date Limite pour Faire sa Declaration de Revenus pour les Impots
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Internal Revenue Service. Convention Between the Government of the United States of America and the Government of the French Republic
10
Direction générale des Finances publiques. Form 5001-SD – Appendix to Form 5000
11
Internal Revenue Service. French Foreign Tax Credits (LB&I Transaction Unit)