France Tax Planning For 2016

There have been a number of French tax reforms over recent years and it is important to ensure your arrangements are up-to-date, and designed to avoid unnecessary tax and take advantage of the opportunities that exist within the French tax regime.

When was the last time you reviewed your tax planning? There have been a number of French tax reforms over recent years and it is important to ensure your arrangements are up-to-date, and designed to avoid unnecessary tax and take advantage of the opportunities that exist within the French tax regime.

French income tax

Income tax rates for 2016 (payable on 2015 income) remain the same as last year, though the income tax bands for each rate have increased slightly.

Last year saw the removal of the 5.5% income tax band, which, though designed to help lower earners, presents tax planning opportunities for investors because of the difference in France between income and taxable income.

Income tax is payable on earnings, pensions, rental income and investment income. There can be more tax efficient ways of holding your investment assets.

Social charges

There is some confusion here. In February 2015 the European Court of Justice ruled that France could not apply social charges on people who were subject to social security in another EU/EEA member state. This meant that non-residents should not be liable on French real estate income and that residents who hold EU Form S1 were exempt on unearned and investment income. Refunds are available for the charges paid in recent years.

That was good news, but as expected it did not last. The French government amended its social security law in such a way that it can once again apply social charges on those people who were temporarily exempt.

So everyone, once again, needs to pay 15.5% social charges on investment income. The combined tax rates with income tax can reach 60.5%, but there are compliant, tax efficient arrangements available in France that can help you lower this tax liability, sometimes significantly.

French wealth tax

Wealth tax remains a concern for wealthier residents. You are liable if your taxable worldwide assets are above €1.3 million, with tax payable on assets over €800,000 at rates of between 0.5% and 1.5%. If you are affected seek advice on how to lower this tax liability.

French inheritance tax (succession tax)

There are no key changes to succession tax this year, but estate planning has been brought into the spotlight by “Brussels IV”, the 2015 EU succession regulation. If you opt for UK succession law to leave assets freely, depending on who your heirs are they could be faced with tax rates of up to 60%.

You should consider your estate planning as a whole – succession tax mitigation, succession law, probate, how you can control who to leave assets to and when and how. These considerations now include whether to choose French or UK succession law – this is a complex area, and you must take specialist advice.

It is important to understand how French taxation impacts you personally, and establish tax planning solutions based on your objectives and family circumstances. Seek personalised advice.

Any questions? Ask our financial 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.