In Reunion, employers bear a significant portion of social security contributions, which cover benefits such as healthcare, pensions, unemployment insurance, and family allowances. The combined employer social security contribution rate averages roughly 45% of the employee's gross salary. However, the specific rates may vary and are often capped depending on factors like industry and company size.

Social Security Contributions

Employers must also withhold income tax from employee wages and pay it to the tax authorities. France uses a progressive income tax system, meaning those with higher incomes pay a higher percentage.

Income Tax Withholding (Pay-As-You-Earn)

In addition to social security contributions and income tax, companies may be liable for an apprenticeship tax calculated based on their total payroll. Businesses exceeding a certain size threshold typically have to pay a professional training tax.

Other Potential Employer Taxes

Depending on the company's size and tax liability, payments for social contributions and income tax withholding are typically made monthly or quarterly.

Payment Deadlines

It's important for employers to stay informed about their tax responsibilities. Detailed information on social security rates, payment procedures, and other employer obligations can be found on the official organization that manages social security contributions. The French Tax Administration Website also offers information regarding income tax withholding and other taxes for employers.

In Reunion, a progressive income tax system is employed, which means the more an employee earns, the higher the percentage of tax they pay. Tax brackets and rates are adjusted annually.

Withholding (Pay-As-You-Earn)

Employers withhold income tax at the source from their employees' salaries. The exact amount withheld depends on the employee's income level and tax bracket.

Social Security Contributions

Employees have mandatory social security contributions deducted from their gross salary. These contributions fund various benefits, including healthcare, retirement pensions, unemployment insurance, and family allowances. Contribution rates are determined by the government and may vary based on income levels and employment categories.

Additional Potential Deductions

Employees may be subject to additional social contributions like the CSG (Contribution Sociale Généralisée) and CRDS (Contribution pour le Remboursement de la Dette Sociale). These deductions are intended to fund social welfare programs.

The standard VAT rate in Reunion is currently 8.5%. This rate generally applies to the supply of most goods and services on the island.

Reduced VAT Rates

Certain services may qualify for reduced VAT rates, including:

• Passenger transport (2.1%)
• Certain food products (2.1%)
• Some pharmaceutical products (2.1%)

Exemptions

Some services are exempt from VAT in Reunion. Examples include:

• Financial services
• Medical services
• Educational services

Filing and Payment Procedures

Businesses providing taxable goods or services generally must file VAT returns and remit collected VAT periodically (monthly or quarterly) to the tax authorities. Businesses may need to register for VAT if their turnover exceeds specific thresholds.

Important Considerations

VAT rules and regulations, including exemptions and filing procedures, can be complex. It's essential to understand these obligations to ensure compliance and avoid penalties.

Tax incentives in Reunion are primarily designed to stimulate specific sectors or activities. Some of the key incentives include:

Investment Tax Credit (Crédit d'Impôt à la Production - CIPE)

This credit is designed to reward businesses for investments in tangible and intangible assets used for production activities. The credit rate and eligibility criteria vary depending on the industry and location within Reunion.

Tax Exemption for Innovation (Exonération pour Innovation)

Businesses conducting research and development (R&D) activities may qualify for a total or partial corporate income tax exemption for a set period. This incentive aims to foster innovation within the territory.

Overseas Employment Tax Credit (Crédit d'Impôt pour la Compétitivité et l'Emploi - CICE)

This credit benefits businesses that create new jobs in Reunion. The credit amount is based on wages paid to new employees.

Qualification Criteria

The specific requirements for availing each tax credit vary. However, most incentives target specific sectors like manufacturing, innovation, or export-oriented businesses. The Investment Tax Credit often requires a minimum investment threshold in assets. Credits like CICE focus on businesses creating new employment opportunities. Your business needs to be registered and operating in Reunion to qualify.

Application Process

The application process for tax credits typically involves the following steps:

1. Gather Documentation: Prepare documents like business registration documents, financial statements, and investment plans as needed for your chosen tax credit.
2. Submit Application: Applications are usually filed electronically through the official French tax authority website.