How will France’s 2020 budget affect social charges, wealth tax and French income tax on investments, real estate and assurance-vie policies?
The French draft budget for 2020 was approved by the Conseil Constitutionnel on 28 December 2019. The main change is a reduction in the income tax rates for calendar year 2020.
Unlike in previous years, with the new PAYE system the applicable rates for calendar year 2020 income have been included in the budget along with the 2019 rates.
French tax rates for 2019 income
The income tax rate bands and scale rates for income received in calendar year 2019 remain unchanged, but the bands have been indexed for inflation:
| Income | Tax rate |
| Up to €10,064 | Nil |
| €10,064 to €27,794 | 14% |
| €27,794 to €74,517 | 30% |
| €74,517 to €157,806 | 41% |
| Over €157,806 | 45% |
The flat rate tax on investment income remains at 30% for 2020.
French tax rates for 2020 income
The most significant change for income tax rate bands and scale rates (for income received in calendar year 2020) is the reduction of the tax rate in the second band from 14% to 11%:
| Income | Tax rate |
| Up to €9,964 | Nil |
| €9,964 to €25,405 | 11% |
| €25,405 to €72,643 | 30% |
| €72,643 to €156,244 | 41% |
| Over €156,244 | 45% |
Real estate wealth tax (IFI)
The current threshold of €1.3 million will stay in place for 2020 and there are no changes to the scale rates of wealth tax. The 75% limitation will also stay in place.
French social charges
The social charges remain the same as 2019, at:
- 9.7% for employment/self-employment income
- 9.1% for pension income
- 17.2% for investment income including rental income.
Assurance-vie
Four early amendments were proposed which would have introduced changes to the tax treatment of assurance-vie in France.
The good news is that all of these amendments were rejected. Therefore, there are no changes in the tax treatment of assurance-vie for 2020.
PAYE and tax returns
From 2020, a substantial proportion of taxpayers will no longer be required to submit full annual tax returns. Instead, they can simply check and approve a prefilled declaration based on the information held by the tax authorities.
This applies to mainly individuals with fixed incomes subject to the new PAYE system.
Individuals with income or capital gains not subject to the PAYE system (e.g. assurance-vie withdrawals) may still have to submit tax returns.
Other tax measures for France in 2020
- Changes to the calculation of taxe d’habitation introduced in the previous budgets means that by 2023 this tax will be completely abolished.
- There are reductions for certain components of the social security contributions for employees/employers.
- The main rate of corporation tax remains at 31%, but companies with turnover under €250 million will pay a reduced rate of 28%.
- The budget did not include any changes to succession tax rates or allowances.
Please do not hesitate to contact us if you would like more information or a review of your tax planning to ensure it is all up to date.
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; individuals should seek personalised advice.
