France’s Finance Bill 2014

The French Finance Bill for 2014 is currently making its way through parliament. Households and businesses have every reason to be wary, after being hit by €70 billion of tax hikes over three years.

The Finance Bill for 2014 is currently making its way through parliament. Households and businesses have every reason to be wary, after being hit by €70 billion of tax hikes over three years.

There is more tax pain to come, with the government aiming to collect an additional €3.4 billion in tax revenue next year (not including the VAT increases). Although the tax rises are much smaller than previous years, this is small consolation for taxpayers living with one of the highest tax burdens in Europe.  Households shoulder most of the burden this time.

Here are some of the key elements of the proposed Finance Bill. It may change before it is finalised.

After being frozen for two years, the scale rates of income tax will again be indexed to inflation, so the income tax brackets for 2014 (2013 income) will increase slightly.

The quotient familial ceiling will be reduced from €2,000 to €1,500. This affects around 1.3 million wealthier households. The tax reduction for families with children in secondary or higher education will be abolished. The La Décote tax relief for low income families will increase from €480 to €508.  

President Hollande’s 75% tax rate (including social contributions and exceptional tax) is back on the table for 2013 and 2014 income, but now applies to remunerations (salaries, bonuses, benefits etc) over €1 million. It will be paid by businesses.

Capital gains made on the sale of shares are now taxed at the scale rates of income tax. The Bill proposes a general abatement of 50% on gains where the shares have been owned for between two and eight years. It increases to 65% for shares owned for longer than eight years.

As previously announced, the budget also revises the taper relief system for capital gains made on the sale of immoveable property. This applies to sales from 1^st September 2013, even though it has not been formally approved.

Currently you have to wait 30 years for a property to be free from capital gains tax and social charges. Under the new system, gains will be free from tax after 22 years. You still need to wait 30 years to be exempt from social charges, though the scale has been revised.

There is an extra 25% reduction for sales between 1^st September 2013 and 31^st August 2014.

Don’t pay more tax than you need to. Seek specialist advice on how to lower your tax liabilities in France.

11 October 2013

The 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 should take personalised advice.