Latest On French Tax Reforms

27.04.11

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 following reforms are to be voted on by Parliament in June. Wealth Tax – Individuals whose total wealth is below ?1.3m will be exempt from wealth tax.

The following reforms are to be voted on by Parliament in June.

Wealth Tax

Individuals whose total wealth is below ?1.3m will be exempt from wealth tax.

Those with wealth of between ?1.3m and ?3m will be taxed at 0.25% on the full amount (not on wealth falling between these two figures).

Those with wealth greater than ?3m will be taxed at 0.5% from the first Euro of wealth (and not from ?3m).

To reduce the impact of these thresholds, taxpayers with wealth just above these two levels will be able to benefit from a tax credit (d??e) against the tax due. This will be similar to the income tax d??e, and will cost a little less than ?100m.

Also, for those with wealth of less than ?3m, there will no be requirement to file a separate wealth tax return. It will be integrated into their income tax return.

It is expected that the date for payment of wealth tax will be extended to 15th September for 2011 (usual date is 15th June). This is to allow time for the reforms to be voted on by Parliament. As the reforms will not be adopted by 15th June this year, they would not be applicable under 2012. By postponing the payment date, it allows the reforms to be effective from January 2011. However, it is still expected that the main reforms will be effective from January 2012, but the increase in the threshold will go ahead from 2011, thus benefiting those with wealth under ?1.3m who could be exempted from wealth tax this year.

The Bouclier Fiscal is being totally abolished.

Small & Medium Enterprises

The reduction for investment in a small or medium enterprise will remain, at an estimated cost of ?200m. However, instead of a 50% reduction (as available today) this is likely to be reduced to around 25% or even less.

Succession Tax

It will be no longer possible to give away just over ?159,000 to each child tax free every six years. The time period is being extended to every 10 years, i.e. a return to the situation that was in force in France pre 2006.

The government will also abolish the tax exemptions for donors who are under the age of 80 (30% reduction at present) and under the age of 70 (50% reduction). This is expected to save the State ?450m.

The top two succession tax rates will be increased from 35% and 40%, to 40% and 45%.

Capital Gains for those leaving France

The government wants to target people who leave France to realise capital gains overseas. Tax will only apply in relation to gains made whilst resident in France.

For example, an entrepreneur who builds worth ?200,000 whilst resident in France, then leaves for Belgium and over time increases the company?s value by a further ?300,000. When he sells the business, he will only be taxed on ?200,000, i.e. the gain that accrued whilst resident in France. The tax point would arise at the time of sale of the shares and not at the date the taxpayer leaves France and therefore in this way the government hopes to avoid breaching EU legislation, which does not allow individuals to be taxed simply because they change residence within Europe. This is hoped to bring in around ?200m.

Income Tax

MPs are still debating whether to introduce a new tax rate for households with income over ?100,000 per Part. This is currently being examined in parliament.

By David Franks, Chief Executive, Blevins Franks

13th April 2011

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 must take 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; individuals should seek personalised advice.

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