The choice between the single flat-rate levy and the progressive income tax scale depends on many parameters:
- The marginal tax rate,
- Other taxpayer income falling within the scope of the single flat-rate levy (other income from movable capital and capital gains),
- The 40% reduction, which only applies in the event of an option for the progressive scale,
- The deductibility of part of the CSG, which is only possible in the event of an option for the progressive scale.
Social security contributions are always applied in the same way regardless of the tax method chosen and at the same rate: 17.20%. On the other hand, there is a difference in terms of deductibility of the CSG:
When the single flat-rate deduction is applied to dividends, no CSG is deductible from taxable income. When the progressive scale of income tax is applied to dividends, the CSG is deductible from taxable income up to 6.80%. The gain obtained in terms of points depends on the marginal tax rate. For example, for a tax rate of 30%, the deductibility of the CSG saves 2.04% on the overall rate (30% X 6.80%). You need to have the proper Tax refund estimate there.
By taking into account these parameters and not taking into account the other income of the taxpayer falling within the scope of the single flat-rate deduction, we can draw the following conclusions concerning the choice of the dividend tax system :
- If your marginal tax rate is less than or equal to 14% , the option for taxation at the progressive scale is more attractive given the application of the 40% allowance on the taxable amount and the deductibility of the CSG.
- If your marginal tax rate is equal to or greater than 30%, the single flat-rate deduction is more interesting, even if you do not benefit from the 40% reduction on the taxable amount and the deductibility of the CSG.
Indeed, it is preferable to bear a tax of 12.80% on all dividends rather than a tax of 30% on 60% of dividends (which is equivalent to an overall rate of 18% on the amount before deduction). The difference is 6 income tax points. The lack of deductibility of the CSG in the event of an option for the single flat-rate deduction does not have a sufficient impact to contradict this finding. As we indicated above, for a tax rate of 30%, the deductibility of the CSG saves 2.04% on the overall rate, which is not enough to close our gap of 6 points. .
To conclude on the choice between the single flat-rate direct debit and the progressive scale, we recommend that you have your decision validated with your accountant.