Latest Tax Changes In France

Here we go again. Last year we had four rectified Finance Bills for 2011, on top of the original one, and now the French government has already published a supplementary Finance Bill

Here we go again. Last year we had four rectified Finance Bills for 2011, on top of the original one, and now the French government has already published a supplementary Finance Bill for 2012. What tax changes do we have this time?

First of all, a change that affects most people is an increase in the rate of social charges applied on investment income from 13.5% to 15.5%. ?Investment income? includes bank interest, dividends, capital gains, annuities, assurance vie contracts etc.

Where the social charges are deducted at source, the 15.5% rate applies to income received from 1st July 2012. However, where they are not deducted at source and so they are paid in arrears after you submit your tax return, the increase is retrospective to 1st January this year.

A new tax on financial transactions will then be introduced from 1st August 2012, at a rate of 0.1%. It will apply to share purchases, including high frequency trading and credit default swap (CDS) transactions. It does not apply to bond trading or to ordinary share purchases by savers, or to employee share schemes.

The standard rate of VAT will increase from 19.6% to 21.2% with effect from 1st October 2012.

The Bill also introduces measures to help the fight against tax evasion, such as increasing the penalties levied on undeclared offshore funds and the time limit for tax investigations.

These tax measures don?t come into effect until after the elections, so it?s possible a change of government will bring in other measures. For example, Fran?is Hollande has said that he would introduce a higher rate of income tax of 45% for income over ?150,000 and 75% on people who earn more than ?1 million a year.

For advice on taxation and tax planning in France speak to a wealth manager like Blevins Franks.

By Bill Blevins, Managing Director, Blevins Franks

9th March 2012

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals must take personalised advice.