France Taxation In 2015
By Mary Taylor, Partner, Blevins Franks
What does 2015 hold in store for us, tax wise?
Compared to previous years the 2015 finance bill did not introduce too many tax changes, but most of the reforms from previous years are still in effect and contributing to higher tax bills.
There has been some improvement for income tax. The 5.5% income tax band has been removed and the 0% tax rate extended. The other tax thresholds increased a little in line with inflation. Many households will pay less income tax this year (on their 2014 income) as a result.
The progressive rates of tax for this year (so for 2014 income), are:
NET INCOME SUBJECT TO TAX TAX RATE
Up to €9,690= 0%
€9,690 to €26,764 = 14%
€26,764 to €71,754 = 30%
€71,754 to €151,956 = 41%
Over €151,956 = 45%
The additional tax imposed on the ‘rich’ in 2012 remains in place for 2014 income. This is 3% for a single person with income between €250,000 and €500,000 and 4% for income over €500,000. Families pay tax at 3% for income over €500,000 and 4% if over €1,000,000.
Income tax is payable on most income, including earnings, pensions, rental income and, since 2013, also investment income – bank interest, dividends and capital gains tax on the sale of shares. This means higher earners pay more tax on their investment income.
The removal of the 5.5% income tax band presents tax planning opportunities for investors, thanks to the difference in France between income and taxable income. Arranging your investments to produce non-taxable income and gains can make a significant difference to your tax bill.
There are favourable tax reliefs available on shares you have owned for a number of years. You can take advantage of this and sell the shares to reinvest the capital in more tax efficient arrangements.
Do not forget that social charges are added on top of income tax. They are 8% on salaries; 15.5% on investments, annuities, rental income, capital gains and interest, and 7.4% on pensions. Pensions are exempt if you have EU Form S1.
There are no changes to succession tax this year, other than two new gift tax allowances on development land and newly built properties.
There is a big change this year though, in that the new European Certificate of Succession regulations comes into effect in August, allowing you to apply the succession law of your country of nationality instead of French law. While it does not cover succession tax, if you elect for British law and so you can freely leave assets to distant or non-relatives, they will face tax of up to 60%. You therefore need to consider how you can reduce this liability for them.
Wealth tax remains a concern for wealthier residents. It is charged on the value of your combined worldwide assets. You are liable if your taxable 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.
While there are no changes to the taxation of UK pensions in France, this key issue for 2015 needs to be highlighted. From April you will have complete freedom to withdraw as much of your UK pension fund as you wish, even the whole amount. You now have many options for your pension funds, and the only way to make the best decision for your personal needs is to look into all the options, the pros and cons, and weigh them up. And French taxation is a big part of this – especially since it provides some opportunities.
Read more about the UK pension reforms here.
Your pensions are a major part of your financial security throughout your retirement years. You need to make sure you get it right, so professional, expert advice is essential.
It is important to understand how French taxation impacts you personally, and establish tax planning solutions based on your objectives and family circumstances. Seek specialist, personalised advice.
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.
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Blevins Franks Seminars
“UK tax. French tax. Myths and Truths…”
In 2015 British expatriates need to understand several new issues.
The seminars will discuss:
French tax changes
How the UK pension reforms affect you
The impact of UK capital gains tax changes and your UK property
Should you choose French or UK estate law?
Estate planning post 2015.
PERPIGNAN – 17 March
CARCASSONNE – 18 March
PAU – 14 April TARN – 15 April