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Updated 3 August 2017

Have you thought about how much capital gains tax you will pay in France when you sell shares and other investments? French tax rules can frequently change so you need to keep up-to-date on the latest rules.

Whether you are thinking of moving to France or already live there, you should seek advice to make the most tax-efficient arrangements for your investments.

Income tax

Investment income, such as capital gains on the sale of shares, are currently added to your other income for the year and taxed at the progressive rates of income tax. This may change in future.

Income tax rates for 2017 (payable on 2016 income) are as follows:

NET INCOME SUBJECT TO TAX TAX RATE
Up to €9,710    Nil
€9,710 to €26,818    14%
€26,818 to €71,898    30%
€71,898 to €152,260    41%
€152,260   €45%

 

Remember, in France you are taxed as a household not as individuals. There is an additional exceptional tax (meant to be temporary) of 3% or 4% for income over €250,000 and €500,000 respectively. The thresholds are higher for families.

Therefore, if you are resident in France, when you sell shares and securities, you add the gains realised to your other income for the year and apply the scale rates of income tax.

Investment income is additionally liable to social charges, which in 2017 is 15.5%.

Need personalised advice? Contact one of our French tax advisers

Capital gains tax reductions

There is some good news. Investments held for two to eight years benefit from a 50% relief, while those held for over eight years receive 65% relief. So if you hold shares for at least two years 50% of the gain on disposal is free of tax, and if held for more than eight years, 65% of the gain is tax-exempt.

Although this taper relief does not apply to social charges, it still presents an opportunity for people who have successful share portfolios. You can apply the 65% discount to release long-term investments, and move the capital into more tax-efficient structures. You would need to seek personalised, specialist tax advice.

Download The Blevins Franks Guide to Taxes in France

Exit tax

Note that you cannot necessarily escape French capital gains tax by leaving France. An exit tax may be levied on unrealised share gains made by individuals who have been resident here for the six years during the preceding 10 years before leaving. Again, gains are taxed at the scale rates, plus 15.5% social charges, and the normal taper relief rules apply. The tax only applies to the portion of the gain accrued when the individual was resident in France.

The tax charges arise the day before the individual leaves France, but there is provision for deferral of payment where the individual moves to EU and European Economic Area (EEA) member states or a country which has a tax information exchange agreement with France and the move is for professional reasons (in this case you need to appoint tax representative). If you move to any other country you have to provide a deposit of the amount of the tax due.

The deferral of payment ends and the tax becomes payable when shares are sold, repurchased, reimbursed, cancelled or, in certain cases, transferred by gift

However, the exit capital gains tax and social charges liability will be cancelled (or reimbursed if already paid) if you keep the shares for eight years following your departure from France or if you move back to France and still hold the shares. It is also cancelled on death.

There are ways to mitigate or avoid this exit tax, seek personalised advice if you may be affected.

Wealth tax

Your investments (the total amount rather than the income) would also form part of your worldwide assets for wealth tax each year. The value of your household’s assets is added up each year and, if it is above €1.3 million, it is subject to tax.

New arrivals in France benefit from a five-year ‘wealth tax holiday’ on assets outside France, so with careful planning you can arrange for your investments to be held in arrangements outside France. If you are affected, seek advice on how to lower this tax liability.

New President Emmanuel Macron had pledged to stop charging wealth tax on investment capital, we are now awaiting confirmation on whether this will go ahead, and when.

The taxation of investment income can be complex, particularly where two countries are involved. It is important to take specialist tax advice to ensure you make the most of the opportunities and do not pay any more tax than absolutely necessary.

Any questions? Ask our advisers for help.

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.