Tax Rises In France

03.11.09

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.

Across Europe tax rises seem to be on the march upwards. The financial crisis has greatly spurred this on, but governments also have the ongoing issue of aging populations to deal with.

Across Europe tax rises seem to be on the march upwards. The financial crisis has greatly spurred this on, but governments also have the ongoing issue of aging populations to deal with.

The UK and Spain have already started to increase their tax rates and now France has joined in as well? in spite of President Nicolas Sarkozy previously rejecting the idea of imposing austerity measures.

France?s public deficit is expected to hit a record ?141 billion this year, compared to ?56.3 billion in 2008. In July a report by the French Court of Audit had concluded that tax rises were inevitable unless current spending was drastically reduced.

The French Finance Bill for 2010 was delivered on Wednesday 28th September. It includes tax initiatives designed to reduce the number of ?social? tax breaks available in France, thereby generating an additional ?3 billion in revenue for the government. According to French Budget Minister, Eric Woerth, all forms of income must in future become subject to social contributions (CSG), including income from capital.

While there are likely to be a few changes as the Bill goes through parliament, one of the main changes outlined in the Bill is likely to hit many French residents who invest in shares and equity funds in order to help them protect the value of their wealth.

Currently, where the proceeds from the sale of shares are below ?25,730 per household per annum, the gain is exempt from capital gains tax of 16% and social charges of 12.1%. Therefore, with careful planning it is possible for even large investors to avoid tax by ensuring that they keep the sale proceeds below ?25,730 per annum, although they are liable to income tax and social charges on dividends.

However, one of the proposed changes in the Bill is that the limit for social charges is removed, to the extent that any realised gains (regardless of the amount sold) will be liable to social charges at a rate of 12.1%. Where the sale proceeds are above ?25,730, the combined 28.1% will apply.

This will inevitably create a ?tax drag? on equity portfolios to the extent that preservation of your wealth will be more difficult to achieve. It will also result in higher tax for people who have been using the ?25,730 tax free limit to increase their income by encashing previously tax free capital gains within their portfolios.

If you will be caught by the proposed increase in tax, you will want to take steps to lower your tax bill. At Blevins Franks, we have successfully provided our private clients with tax led wealth management advice since 1975. Our unique approach helps position our clients to protect their wealth in real terms, and we are able to achieve this in the most tax efficient way, whether you are currently French tax resident or planning to be so in the future. Indeed we have helped many clients understand that they can live in France and pay less tax than they would have by remaining UK tax resident.

23rd October 2009

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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