30 % flat tax (PFU): explanation and 2026 optimization

The PFU (Prélèvement Forfaitaire Unique), nicknamed "flat tax", was introduced on January 1, 2018 by the 2018 finance law (Macron government). Before 2018, capital income was subject to the progressive income tax scale (up to 45 %) plus 17.2 % social contributions, totaling potentially 62.2 % for high earners. One of Europe's highest rates — constant argument of business leaders and foreign investors against settling in France.

Macron set up the PFU at 30 % to achieve 3 simultaneous goals:

1. Align France with European average: Germany 26.4 %, Spain 28 %, Italy 26 %, Netherlands 25 %, UK 32-39.4 % depending on bracket
2. Simplify taxation: a single rate to understand, no more line-by-line calculations
3. Stimulate productive investment: encourage savings in companies rather than real estate

30 % breakdown: - 12.8 % income tax (IR) — the flat part - 17.2 % social contributions (CSG + CRDS + solidarity levy) — amount applying to ALL capital income, regardless of regime chosen

Important: the 17.2 % social contributions are incompressible. Even in PEA after 5 years, they're due. Only income tax can be saved via fiscal wrappers.

The PFU is default, but you can annually choose to submit your capital income to the progressive income tax scale (box 2OP checked in declaration). Relevant in 4 specific cases:

1. You are NOT taxable (0 % marginal bracket) If your marginal tax bracket is 0 % (very low fiscal reference income), progressive scale > PFU. Instead of paying 12.8 % income tax, you pay 0 %. You just pay the 17.2 % social contributions, totaling 17.2 % instead of 30 %.

Example: Anaïs, Paris student, €8,000 annual income (summer job + student jobs). €2,000 ETF capital gains. PFU 30 % = €600 owed. Scale = 0 % IR + 17.2 % SC = €344. Savings: €256.

2. You're in the 11 % bracket (first taxable bracket) If you're in the 11 % bracket, scale taxation = 11 % + 17.2 % = 28.2 % vs 30 % at PFU. Small savings of 1.8 % on your gains.

Example: Marc, young single executive, €30,000 income. 11 % bracket. €5,000 annual dividends. PFU 30 % = €1,500. Scale 28.2 % = €1,410. Savings: €90.

3. 40 % deduction on dividends at scale only If you choose the scale, you benefit from the 40 % deduction on dividends of French and European stocks (article 158, 3°-2° of CGI). This 40 % reduces the income tax base (not social contributions).

Example: Sophie, €50,000 income, 30 % bracket. €10,000 dividends. PFU 30 % = €3,000. Scale: 40 % deduction → IR base = €6,000, IR at 30 % = €1,800 + SC on €10,000 = €1,720, total = €3,520. Here PFU > Scale. But in 11 % bracket: 40 % deduction → IR = €660 + SC = €1,720 = €2,380 (vs €3,000 PFU). Advantage €620.

4. You have many carryforward losses (-10 years) If you accumulated 10-year carryforward capital losses, you can only impute them in scale regime, not PFU. Advanced case for active traders.

2026 practical rule: - 0 % or 11 % bracket → opt for scale (savings 1-13 %) - 30 %, 41 %, 45 % bracket → keep PFU by default (savings 1-15 %) - Mixed case (large dividends + small gains) → case-by-case simulation with accountant

Rather than paying 30 % PFU in regular brokerage, several legal fiscal wrappers reduce or eliminate capital gains tax:

1. PEA (Plan d'Épargne en Actions) — best for European stocks - €150K cap deposits (classic PEA) + €75K (PEA-PME) - After 5 years: income tax exemption on gains, dividends — only 17.2 % social contributions due - 10-year savings at 7 %/year, €100K: ~€12,400 net vs CTO - Drawback: EU stocks only (except PEA-eligible synthetic ETF for S&P 500/Nasdaq)

2. Life insurance — best for diversification + transmission - No deposit cap - After 8 years: annual deduction €4,600 (single) / €9,200 (couple) on withdrawal gains, then 24.7 % taxation beyond - Transmission advantage: €152,500 per beneficiary exempt from inheritance tax (deposits before 70) - Allows holding euro funds (safety), UC ETFs (growth), SCPIs, private equity - Drawback: wrapper fees 0.5-1 %/year + UC fees, generally lower performance than pure PEA

3. PER (Plan d'Épargne Retraite) — for high brackets (30+ %) - Deposits deductible from taxable income up to annual cap (10 % of pro income, max ~€35K) - At retirement: exit as annuity or capital, scale taxation - Immediate income tax savings for 30/41/45 % brackets - Drawback: money locked until retirement (except exceptional cases: primary residence purchase, disability)

4. Employer stock options and free shares - Specific regime with deductions per holding duration - Capped but advantageous for tech executives

Optimal 2026 strategy (the tax-efficient "Stack"):

1. Livret A + LDDS filled (€35K secured cash at ~3 %)
2. PEA filled to max (€150K) with World + Eurostoxx 50 ETFs
3. Life insurance in parallel (amounts > €50K) with diverse UC
4. PER if bracket ≥ 30 % (~€5-15K/year deductible)
5. CTO last (residual for direct US stocks, crypto ETFs, bonds)

This order mechanically minimizes PFU over 20-30 years. For €1M of optimized financial wealth, cumulative tax savings vs single CTO total tens or hundreds of thousands of euros over time.