PFU vs Progressive Tax: Which Is Better for Your Investment Income in France? (2026)
If you have interest, dividends, or capital gains from securities, you face a choice on your French tax return: accept the default flat tax (PFU) or switch to the progressive scale by ticking box 2OP. In 2026, with the PFU rate rising to 31.4%, getting this right matters more than ever. This guide shows you exactly how to decide.
Ticking box 2OP is simply you telling the tax office: "Please ignore the flat tax and instead tax my investment income like it's a salary, because my overall income is low enough that it will save me money."
That is the whole decision in one sentence. Whether it actually saves you money depends on your marginal tax rate — and on a few important details that catch people out every year.
For context on how social charges interact with this decision, see our guide to social charges in France. For the broader picture of how investment income is taxed, see our overview of how the French tax system works.
The Default: What Happens If You Do Nothing
If you do not tick box 2OP, the system applies the PFU (Prélèvement Forfaitaire Unique) — the flat tax — automatically to your investment income.
In 2026, the PFU rate is 31.4%, broken down as:
- Income tax: 12.8%
- Social charges: 18.6%
- Total: 31.4%
The PFU applies automatically to bank interest, dividends, and capital gains from the sale of shares or securities. You do not need to do anything to stay on the PFU — it is the default.
Note on the 2026 rate increase: The PFU rose from 30% to 31.4% in 2026 following a 1.4 percentage point increase in social charges on investment income. This applies retroactively to 2025 income declared in spring 2026.
You can see the current PFU breakdown on the Taxpert data page.
When to Consider the Progressive Scale
The general rule is straightforward: consider ticking 2OP if your marginal income tax rate (TMI) is 0% or 11%.
In 2026, the 11% bracket applies to taxable income up to €29,579 per part. If your total taxable income per part is below this threshold, the progressive scale will almost certainly save you money on the income tax portion of your investment charge.
Worked Examples — €1,000 of Investment Income
The table below shows the total tax due on €1,000 of investment income under each option, at each marginal rate:
| Income Type | PFU 31.4% | Progressive 0% TMI | Progressive 11% TMI |
|---|---|---|---|
| Bank Interest | €314 | €186 | €296 |
| Dividends | €314 | €186 | €252 |
| Capital Gains | €314 | €186 | €296 |
Why are dividends cheaper under the progressive scale at 11%? Under the progressive scale, dividends benefit from a 40% tax-free allowance — only 60% of your gross dividend is actually subject to income tax. So on €1,000 of dividends, only €600 is taxed at 11% = €66 income tax, plus 18.6% social charges on the full €1,000 = €186. Total: €252 — versus €314 under the PFU.
Why is the 0% bracket so powerful? At 0% marginal rate, ticking 2OP means you pay no income tax at all on investment income — only the 18.6% social charges. Every type of investment income costs €186 per €1,000 instead of €314. That is a saving of €128 per €1,000, or 12.8 percentage points.
Important: Social charges are always due regardless of which option you choose. Box 2OP only changes the income tax portion (12.8%). It does not reduce or remove social charges.
The Global Option — Why the Big Numbers Always Win
This is the most important constraint to understand before you decide.
Box 2OP is a global option. It applies to all investment income across your entire household — you cannot choose the progressive scale for dividends and the PFU for capital gains. It is all or nothing.
This creates a potential conflict if you have a mixed investment portfolio.
Example of the conflict: Imagine you have:
- €500 in dividends (where progressive scale saves you money — you are in the 11% bracket)
- €20,000 capital gain from selling shares (where your total income, including the gain, pushes you into the 30% bracket)
If you tick 2OP to save money on the dividends, you simultaneously apply the progressive scale to the large capital gain — where the 30% rate is far more expensive than the 12.8% PFU. The saving on the dividends is wiped out many times over by the additional cost on the gain.
The rule: the big numbers always win the decision. If you have a large capital gain in the same year as small dividend or interest income, run the numbers carefully before ticking 2OP.
Use the Simulation — It Is Reliable
The online filing system at impots.gouv.fr will often display a message at the end of your declaration if it detects that ticking 2OP would save you money. This simulation is generally reliable.
However, do not rely on the message alone. Before you finalise:
- Note your current tax estimate
- Go back and tick box 2OP
- Check the new estimate
- Keep whichever is lower
The system shows you the impact in real time. Use it — but verify it yourself rather than accepting the pop-up message without checking.
The Hidden Bonus — The CSG Deductible
If you opt for the progressive scale, an additional benefit appears the following year.
6.8% of the CSG you pay this year becomes deductible from your taxable income next year. This deduction is only available on the progressive scale — it is not available if you use the PFU.
In practical terms: if you have €10,000 in dividends and opt for the progressive scale, €680 (6.8% of €10,000) reduces your taxable income next year. If you are in the 11% bracket, that is an extra €75 in tax savings — a hidden 1–2% discount on your effective rate.
It is not a large amount in isolation. But combined with the primary saving from the progressive scale, it makes the 2OP option slightly more attractive than the headline numbers suggest for those on lower marginal rates.
If you opted for 2OP the previous year, ensure that your CSG deductible has been accounted for by checking the amount on Form 2042 — Section 6 — Box 6DE.
Who Should Almost Never Tick 2OP
Anyone in the 30%, 41%, or 45% tax brackets should almost always stay with the PFU.
The PFU caps the income tax portion of your investment charge at 12.8%. Once your general income pushes you into the 30% bracket — taxable income over €29,579 per part in 2026 — the progressive scale charges more than twice the income tax rate on your investment income. The PFU wins clearly.
The only exception worth investigating is if you have dividends with the 40% allowance and your income is at the lower end of the 30% bracket — but this requires running the actual numbers, not a rule of thumb.
Common Mistakes When Choosing Between PFU and Progressive
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Thinking box 2OP removes social charges. It does not. Social charges of 18.6% are due on investment income regardless of which option you choose. Box 2OP only affects the 12.8% income tax portion.
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Not considering the global constraint before deciding. Ticking 2OP applies to all investment income across your whole household. If you have a large capital gain alongside smaller dividend or interest income, the gain dominates the decision. Always calculate the total effect, not just the effect on one income type.
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Applying the 40% dividend allowance to the social charges calculation. The allowance reduces the taxable base for income tax only. Social charges are calculated on 100% of gross dividend income — the allowance does not apply.
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Assuming last year's decision is right again this year. Your income mix changes. A year with a large capital gain should be assessed differently from a year with only interest and dividends. Check the simulation every year rather than defaulting to the same choice.
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Not using the impots.gouv.fr simulation. The system tells you which option is cheaper. There is no reason to guess — use the simulation and verify it manually by toggling 2OP on and off.
Quick Decision Guide
| Your situation | Likely best option |
|---|---|
| Marginal rate 0% | Progressive scale (2OP) — save 12.8% on income tax |
| Marginal rate 11%, mainly dividends | Progressive scale (2OP) — 40% allowance makes it worthwhile |
| Marginal rate 11%, mainly interest or gains | Progressive scale (2OP) — likely still cheaper, verify with simulation |
| Marginal rate 30% or above | PFU default — 12.8% beats 30%+ every time |
| Large capital gain + small other investment income | PFU default — the gain dominates, big numbers win |
| Mixed portfolio, unsure | Use the impots.gouv.fr simulation — it will tell you |
Frequently Asked Questions
What is box 2OP on the French tax return?
Box 2OP is the option to waive the flat tax (PFU) and have your investment income — dividends, interest, and capital gains — taxed under the progressive income tax scale instead. It is ticked voluntarily on your return and is irrevocable for the year once submitted.
What is the PFU rate in France in 2026?
31.4% — comprising 12.8% income tax and 18.6% social charges. This is an increase from 30% in previous years, following a 1.4 percentage point rise in social charges on investment income that applies retroactively to 2025 income.
Does ticking box 2OP reduce my social charges?
No. Social charges are due on investment income regardless of whether you choose the PFU or the progressive scale. Box 2OP only changes the income tax portion (12.8%). If you are in the 0% income tax bracket, ticking 2OP means you pay no income tax but you still pay 18.6% social charges.
Can I choose the progressive scale for dividends but keep the flat tax for capital gains?
No. Box 2OP is a global option — it applies to all investment income across your entire household. You cannot mix and match by income type. This is why large capital gains often override the decision in favour of keeping the PFU.
At what income level does the PFU become better than the progressive scale?
As a general rule, once your marginal tax rate exceeds 11% — which in 2026 means taxable income above €29,579 per part — the PFU at 12.8% income tax is almost always cheaper than the progressive scale. At 30% marginal rate, the PFU saves you 17.2 percentage points on the income tax portion alone.
Is the impots.gouv.fr simulation reliable?
Generally yes. The system will show a message if it detects that ticking 2OP would save you money. However, verify it yourself by toggling 2OP on and off and comparing the total estimate. Do not rely solely on the pop-up message.