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From 2026, members of a VAT group can be exempted from payroll tax.

The introduction of the "single taxable person regime" (VAT group) allows the consolidation of VAT payment and a considerable reduction in the number of transactions that must be declared: internal transactions carried out between the members of the group are no longer subject to VAT (CGI, Art. 256 C).

However, the formation of such a group has potentially negative consequences for payroll tax since, for each of its members, it increases the proportion of turnover not subject to VAT and, consequently, the amount payable by way of payroll tax.

In order to encourage the use of the single taxable person regime by large groups in the industrial or distribution sectors, Article 36 of the Finance Act for 2025 introduces an exemption from payroll tax to neutralise the consequences resulting from the membership of a VAT group by companies which, taken separately, are not currently subject to payroll tax but could fall within its scope due to internal revenues generated by the establishment of a VAT group (a similar measure had already been adopted in 2023, as part of the Social Security Financing Law for 2024, but had been censured by the Constitutional Council for procedural reasons).

The new Article 231 A of the General Tax Code thus provides that remuneration paid by the employer who is a member of a single taxable person is exempt from payroll tax when the following conditions are met:

• that employer would not be subject to payroll tax if it were not a member of the single taxable person;
• in respect of the calendar year preceding the payment of the remuneration, the turnover of the transactions carried out by the single taxable person which give rise to the right to recover is at least equal to 90% of the total amount of his taxable turnover for VAT purposes.

The exemption applies to payroll tax due in respect of remunerations paid from 1 January 2026. In view of the rules governing the option for the single taxable person regime, the application of this regime from 1 January 2026 implies that the option would be made by 31 October 2025 at the latest.

The payroll tax is therefore no longer an obstacle to the creation of a VAT group, which suggests its adoption in sectors other than banking and finance.