Dividends remain one of the most taxed capital income for an individual who holds his titles outside the tax envelope. In France, it is the single fixed levy, or flat tax, which has applied since 2018. But this is increased to 31.4% since 2026with the increase in social security contributions. In fact, the increase comes from the CSG, which takes an additional 1.4 points in the context of financing Social Security. Enough to further increase the bill on dividends received on an ordinary securities account.
“The withholding tax of 31.4% applies at the time of payment of the dividend”explains Andrea Tueni, market expert at Saxo Banque. But the flat tax is not inevitable, he adds: “This levy is not applied to the PEA”. Indeed, the Stock Savings Plan is one of the levers that allows you to reduce the bill – there is also life insurance, the choice of an ETF that capitalizes rather than distributes. In addition to this, low-tax taxpayers can opt for the progressive scale by checking box 2OP of the declaration. The option is global, so it applies to all capital income for the year (dividends, interest, capital gains).
PEA and life insurance, the envelopes which cancel income tax
If you receive your dividends via an envelope, such as PEA or life insurance, they are neither taxed nor subject to social security contributions as long as you do not withdraw them from the envelope. For the PEA, after five years of holding, the withdrawals only support the 18.6% social security contributions: income tax is completely exempt. The payment ceiling is set at 150,000 euros per person, 300,000 for a couple.
For life insurance, social security contributions remain at 17.2%or 1.4 points less than on the PEA and the ordinary securities account. Indeed, it is the only envelope to have escaped the increase in the CSG on capital income. Dividends are capitalized within the contract without any tax. Upon exit, after eight years, a reduction of 4,600 euros for a single person (9,200 for a couple) applies each year to the earnings withdrawn.
The ETF capitalizing to avoid direct tax
If you remain in an ordinary securities account, therefore outside the tax envelope, choosing a capitalizing ETF rather than a distributing ETF can make a real difference. Concretely, the capitalizing ETF does not pay dividends: it reinvests them automatically. It is the price of the share which increases to reflect the dividends received. No dividends arrive in your account, so no flat tax is due until you sell your shares. In other words: the taxation is postponed at the time of the transfer.
In a PEA, this mechanism has no tax benefit, since the dividends are not taxed in the envelope. The choice between capitalizing and distributing is then a matter of practical logic: no need to arbitrate yourself when you receive your coupons.
Tax on foreign dividends
Finally, there remains one subtlety: foreign actions. “The tax treatment will depend on the country,” explains Andrea Tueni. It all depends on ” there tax agreement signed with France. If you have American stocks for example, the withholding tax will be 15%”he adds. The mechanism avoids double taxation through a tax credit recovered during the French declaration: 15% of the gross is returned via form 2047, which reduces the total tax burden to 31.4% as on a French share.
For other countries, the mechanism is more penalizing: the tax credit is generally capped at 15%, and when local withholding exceeds this threshold (a Spanish stock is subject to 21% withholding for example, a German up to 26%), the excess points are lost.
