2027 finance bill proposes tax changes

The 2027 Finance Bill (PLF) and Social Security Financing Bill (PLFSS) suggest a new rule for how termination payments are taxed and handled for social contributions. This rule aims to bring the tax and social contribution systems more in line with each other.

New exemption ceiling for termination payments

The proposed changes would set a single exemption ceiling for termination payments at 1 PASS, which is equivalent to 48,060€ in 2026. This replaces the current separate thresholds: 2 PASS (96,120€) for social contributions and 6 PASS (288,360€) for income tax.

Impact on higher termination payments

Under the new rules, any termination payment exceeding 48,060€ would be both taxable and subject to social contributions. This could increase the financial burden on employees who receive larger termination payments.

Reform applies to all termination types

The reform would apply to all forms of termination, including prud'homal settlements, PSE (Plan de Sauvegarde de l'Emploi), and conventional terminations. The effective date is January 1, 2027, as decided by the National Assembly's Finance Committee on October 7, 2026.

Aim to target high-earning employees

The PLF 2027 aims to limit the tax exemption of termination payments to 1 PASS, applicable to all forms of termination. The PLFSS 2027, through Article 6, seeks to align the social contribution regime with the tax changes, targeting a small fraction of high-earning employees while claiming 95% of employees would remain unaffected.

Legal and regulatory adjustments

The current social contribution exemption under Article L.242-1, II, 7° of the CSS allows for an exemption up to 2 PASS for tax-exempt termination payments. The PLFSS extends this to all termination-related payments, including those from judicial decisions or settlements.

Challenging a previous court ruling

The PLFSS also challenges a previous court ruling from January 30, 2025, which allowed full exemption for compensation intended to offset losses. Under the new rules, such amounts would now be subject to the 1 PASS ceiling if paid in the context of a termination.

Complex application of new rules

The changes will require careful application, as some situations may involve the old tax regime and the new social regime. For example, a conventional termination signed in December 2026 with a termination date in February 2027 would be subject to the old tax regime but the new social regime.

Bills still under parliamentary review

The PLF and PLFSS are still under parliamentary examination and may be subject to further changes before final approval.