Mary Taylor is holding seminars in Carcassonne on 4th October [Domaine d’Auriac} and Biarritz [Hotel du Palais] on the 5th October, both 10.30 for 11am. The subject is “Protecting your wealth has never been more important” and the seminar reviews this year’s tax reforms, what more we can expect in 2013, and how these and other factors can impact your wealth. Contact Mary on the telephone or email above for more information or to reserve your place, or book online by clicking here.
How Will The Next Round Of Tax Measures Affect You?
By David Franks, Blevins Franks Financial Correspondent
The government is looking to save €36.9 billion through its 2013 Finance Bill, saying that everyone will play a part. The budget proposals, unveiled on Friday 28th September, include €12.5 billion of cuts; €10 billion of extra taxes from individuals and €10 billion from taxes on corporations. It will also receive €4.4 billion of additional tax revenue from the new taxes announced in July.
The key personal tax measures are summarised below. At this stage they are still proposals and need to go through parliament before becoming law, and so may change.
Taxation of income from capital
Right from the beginning, President François Hollande said he wanted ensure that income from capital is taxed at the same rate as income from work, and it looks like this will start to apply from this year’s income.
Investment income will be taxed as employment income (from 2012), so at the scale rates of income tax. A withholding tax will be introduced at 21% for dividends and 24% for interest, which will be deductible from the final tax payable at the scale rates.
Gains on shares and securities will also be taxed at the scale rates (from 2012). This will also apply to the exit tax for individuals who leave France after 28th September 2012.
Do not forget that 15.5% social charges are always also applied to interest, dividends and capital gains.
Gains on property
Gains on immoveable property (not including development land) will remain taxable at the 19% fixed rate, plus social charges, but with a special 20% deduction against the taxable gain and current deductions for length of ownership. This will apply from 2013.
Gains on development land will be taxed at scale rates from 2015.
New higher tax rates
A new marginal rate of income tax of 45% will be imposed on income in excess of €150,000.
Anyone who earns over €1 million a year from employment or self employment income will have to pay 75% tax on the excess. This would take into account other contributions paid, so the taxpayer would not have to pay social charges on top of the 75% tax (on the income over €1m). This is only meant to be effective for 2012 and 2013.
Income tax bands frozen
Even if you are not affected by the higher tax rates, you may still have to pay more income tax next year (for 2012 income) since the income tax bands are to be frozen, instead of indexing them to inflation.
The government had been planning a major wealth tax reform, but has now proposed that wealth will continue to be taxed at scale rates of tax next year, as follows:
Taxable wealth € Tax rate
Up to 800,000 0%
800,000 – 1,310,000 0.5%
1,310,000 – 2,570,000 0.7%
2,570,000 – 5,000,000 1%
5,000,000 – 10,000,000 1.25%
Over 10,000,000 1.5%
The entry level for paying wealth tax will be €1.31million. A reduction will apply to wealth between €1.31 million and €1.41 million.
The Constitutional Court had warned the government that any plans to restore the former wealth tax scale would have to be accompanied by a cap mechanism to ensure that the tax is not confiscatory. The government is now planning to introduce a fiscal cap of 75%, whereby a taxpayer cannot pay more than 75% of their income in wealth tax, income tax and social contributions. No such cap applied in 2012.
For advice on the 2012 and 2013 tax measures and how to lower your tax liabilities in France contact your local Blevins Franks Partner, Mary Taylor.
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.