France Budget 2016

27.10.15

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

The French government has released its draft budget for 2016. It only includes a few tax measures affecting our clients.

It is that time of year again, when the government releases its proposed budget for the following year and starts to make its way through the parliamentary process.

The 2016 draft budget was presented on 30th September 2015. This year it only contains a few measures affecting our clients, and most of them simplify existing regimes. It includes, however, measures reducing company taxation and employer social contributions.

The main measures affecting our clients are summarised below.

  • Update of the income tax bands for income arising in calendar year 2015

NET INCOME

SUBJECT TO TAX

BAND

TAX RATE

TAX ON BAND

CUMULATIVE TAX

Up to €9,700

€9,690

Nil

€9,701 to €26,791

€17,090

14%

€2,392.6

€2,392.6

€26,792 to €71,826

€45,034

30%

€13,510.2

€15,902.8

€71,827 to €152,108

€80,281

41%

€32,915.21

€48,818.01

Over €152,108

45%

  • The décote will increase from €1,135 to €1,553 for a single person and from €1,870 to €2,560 for a couple.
  • A consultation for withholding of income tax on employment income at source (similar to UK PAYE) – prélèvement à la source – will take place in 2016, with full implementation in 2018. With the reform, income tax will be withheld on a monthly basis (withheld directly by the employer or by the bank), when the income is earned. An annual tax return is likely to remain necessary to take into account the progressive rates of income tax, the household regime, tax credits and allowances.
  • Online income tax return will be required for most taxpayers from 2016 (for those with a certain level of income), with full implementation in 2019.
  • The credit for sustainable development is extended up to 31st December 2016.

The budget still needs to be approved by parliament, so changes or additions are possible.

Social charges on unearned and investment income

Earlier this year, the French administrative Supreme Court confirmed that social charges on unearned and investment income, for instance capital gains or rental income, are subject to European legislation on social security.

On 20th October 2015, the French tax administration confirmed that individuals who are subject to the social security of another EU Member State should not pay social charges on unearned and investment income.   

The decision applies to:

  1. French residents (Form S1 holders), on unearned and investment income
  2. Non-French residents on French real estate income (capital gains and letting income)

The French revenue has confirmed that those individuals who are subject to the social security of an EU Member State, and who unduly paid social charges on unearned income in 2013, 2014 and 2015, will be refunded.  

Claims can be made online; to the local tax offices (for all type claims except real estate capital gains claims), or to the direction départementale des finances publiques (for real estate capital gain claims).

A claim for a refund of social charges would need to be made before 31st December of the second year following the receipt of the tax demand (for letting income and moveable capital gains), or following the imposition of the charges. You should contact your lawyer or accountant for help filing a claim.

Going forward, the draft social security budget proposes to reallocate the proceeds of the social charges to be in line with the EU legislation. If the French Parliament accepts this proposal, social charges will be due on unearned income again from 2016, even for individuals subject to the social security of another EU Member State.  

Depending on your circumstances, you may wish to consider crystallising unearned income or gains before the end of this year to avoid the social charge liability. Next year it will be too late.

Click here to contact us for personalised advice

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.

Updated 30 October 2015

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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