How Is French Tax Shaping Up For 2015?

The tax burden on French residents has increased considerably over recent years.  There is however some good news for investors.

The tax burden on French residents has increased considerably over recent years, with recent budgets introducing tax hikes or reforms resulting in higher taxes for many individuals and families.  This earned the government an extra €70 billion over the last three years.

Nonetheless, many British nationals improve their tax position by moving to France.  With our specialist advice, it is possible to take advantage of tax compliant opportunities to protect assets from the various French taxes.  

In contrast to previous years, the 2015 budget proposal includes only limited changes to the tax system.

The main development is the removal of the 5.5% income tax band which currently applies to income between €6,011 and €11,991. The 0% tax rate will be extended up to €9,690, when tax kicks in at 14%. The other income tax thresholds will increase by 0.5%.  

The budget includes a number of reforms to taxes relating to real estate, in an attempt to stimulate the economy.  They are not wide reaching though.  For example, the capital gains taxation of development land has been aligned with that of real estate, and two further gift tax allowances on development land and newly built properties are proposed.

As always, the budget tax reforms may be amended as they go through parliament. The social security budget proposal may also contain further measures.  

While the proposed budget does not include any direct reforms to the taxation of investments, changes from previous years continue to result in higher taxes for many investors – unless they have moved their capital into more tax efficient arrangements.  Capital gains on shares, interest and dividends are now taxed at the progressive rates of income tax of up to 45%.  15.5% social charges also apply.

There is, however, some good news.  The removal of the 5.5% income tax band presents some interesting tax planning opportunities for investors, because of the difference in France, from a tax perspective, between income and taxable income. How your investments are arranged can have a dramatic effect on how much tax you pay.  

Also, the 2014 budget introduced a new general taper relief scheme for capital gains, so that if you have owned shares for a number of years you could take advantage of favourable tax reliefs to sell the assets now and reinvest the capital in more tax efficient arrangements.

We too often meet people who have not fully understood the French tax regime or the implications for them, and so pay much more tax than necessary.  With the endless changes over recent years, expert guidance is more essential than ever before.  

This is a brief summary of the 2015 budget and the taxation of investment income. Please CLICK HERE to contact us to make an appointment so your local Blevins Franks Partner can put this into context of your personal situation and aims, and discuss tax planning opportunities.  

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.