French Taxation in 2014
By Mary Taylor, Partner, Blevins Franks
You have probably noticed your tax bills rising over recent years, and your 2013 tax return will be no exception. Taxes imposed under President Hollande’s government have seen France’s tax burden hit 46% of gross domestic product, which is one of the highest among the world’s top economies.
Although the 2014 Finance Bill was not as punitive, tax wise, it still increases the tax burden for households in France.
In spite of this, many British nationals still improve their tax position by moving to France. With our specialist advice, it is possible to take advantage of tax compliant opportunities to protect assets from the various French taxes.
Following a two year freeze, the income tax bands have been re-indexed to inflation. The income tax rates for 2013 income (declared in 2014) are as follows:
|Income band €||Tax Rate|
|Up to 6,011||0%|
|6,011 – 11,991||5.5%|
|11,991 – 26,631||14%|
|26,631 – 71,397||30%|
|71,397 – 151,200||41%|
The additional “exceptional contribution” tax continues to be imposed at 3% for income over €250,000 and 4% for income over €500,000.
The quotient familial tax advantage for the extra parts for household taxation has reduced from €2,000 to €1,500.
The highly publicised new 75% rate applies to remunerations in excess of €1m for 2013 and 2014. It is payable by the employer. The actual new rate is 50%, but social charges and other taxes take it up to 75%.
Capital Gains Tax
Capital gains realised on the sale of shares from 2013 onwards are taxed at the scale rates of income tax.
However, there is a general taper relief of 50% for investments held for between two and eight years, and 65% thereafter. Additional reductions may be available when selling shares in small companies.
For sale of property, the new taper relief scheme applies from 1st September 2013. Tax is reduced by 6% for years 6 to 21 of ownership, then by 4% for year 22, giving full exemption from tax after 22 years. For social charges you still need to wait 30 years. They are reduced by 1.65% for years 6 to 21, by 1.6% for year 22 and then by 9% for years 23 to 30.
An exceptional 25% one-off reduction in the taxable gain applies for sales completed between 1st September 2013 and 31st August 2014.
The tax rate is 19%, with additional tax of between 2% and 6% for gains over €50,000, plus 15.5% social charges. The main home is exempt.
The reforms to Assurance Vie went ahead largely as proposed in mid-November.
There were no changes to the beneficial tax treatment of withdrawals from policies – the applicable rates and holding periods remain as before.
However, there was a change to the succession tax treatment of Assurance Vie policies on death. The tax-free threshold of €152,500 and 20% rate were not modified, but the tax rate is increased from 25% to 31.25% starting at a tax basis of €700.000 (previously €902.838).
Policies set up before January 1998 have lost their exemption from social charges when encashed.
The threshold for France’s exit tax is reduced from €1.3m to €800,000, and the scope now includes a wider range of gains. This tax is paid by individuals leaving France on unrealised capital gains, at the progressive rates of income tax.
The standard rate has been revised upwards slightly, to 20%, while the intermediate rate increased from 7% to 10%. There are some exceptions and the reduced rate is maintained at 5.5%.
There were no changes to rates or the wealth tax cap whereby total taxes cannot exceed 75% of income. While this sounds very high, with our specialist advice you may be able to reduce your taxable income, thus reducing your tax bill.
Tax on bank interest and dividends
There were no changes here, but as imposed last year, dividends and bank interest are now taxed at the scale rates of income tax, so higher earners pay more tax. You need to pay 21% and 24% tax respectively on account, unless your income falls below set thresholds. For foreign income you need to declare and pay the tax by the 15th of the following month. This does not apply to income rolled up within an Assurance Vie.
Specialist tax planning remains more important than ever, whether you already live in France, are planning to move here, or are returning to the UK.
Blevins Franks Spring Seminars
Blevins Franks are holding a series of seminars at the end of March and early April, to explain the recent changes and how to get the best from your current situation. Contact your local Partner, Mary Taylor, for information or if would prefer to arrange a private appointment.
Mary Taylor TEL: 05 62 30 51 40 EMAIL firstname.lastname@example.org.
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; an individual should take personalised advice.
To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com