Tax planning Seminars in Pau and Perpignan 20th and 21st March.
How are your savings and investments taxed in 2013?
Be delighted to welcome you to the lovely Hotel Villa Navarre in Pau on the 20th or Hotel Villa Du Flot Perpignan on the 21st, where we will discuss the recent changes in taxation. How will they affect your income and assets? I have 23 years experience with 13 of them advising in France. Just use this link to book and find out more. [James has kindly allowed this] There is no cost and buffet refreshments are provided.
President François Hollande said all along that he wanted income from capital to be taxed at the same rate as income from work, and this is now going ahead.
Note that besides the tax on the income and gains explained below, as always in France you also need to pay need to pay social charges. These currently amount to 15.5% for investment [including rental] income.
Until the end of 2012, you could choose whether your bank interest was taxed at the scale rates of income tax or at a fixed rate of tax which was 24%.
For interest received from 1st January 2013 you no longer have a choice. All interest is now taxed at the progressive rates of income tax.
The government had wanted this to apply from 2012 income, but this was overturned by the Constitutional Court.
French banks will deduct a 24% withholding tax from your bank interest, to enable the government to collect tax over the year. Depending on how much you earn, this may not be the final amount of tax due on this income. Any balance would be paid when you do your tax return for 2013.
This measure will particularly affect those taxed at the marginal rates of 30% and above, who will find their tax bills on investment income increase. Households with taxable income below €50,000 can request to be exempted from the withholding tax regime.
You also used to have a choice as to whether dividends were taxed at the scale rates or a special fixed rate of 21%, but not any more. As with interest, dividends will be taxed at the income tax scale rates, though an initial 21% withholding tax will be deducted at source.
The deductions of €1,525 or €3,050 (for a couple) against dividend income have been abolished.
Capital gains on shares and securities
Capital gains made on shares and other securities are no longer taxed at a fixed rate of 19%. Gains realised during calendar year 2012 will be taxed at a fixed rate of 24%.
With effect from 2013 income, these gains are also taxed at the scale rates of income tax.
This also applies to gains subject to France’s exit tax, effective for people who left France after 28th September 2012.
Entrepreneurs will continue to benefit from the 19% flat tax rate when they sell a company.
There is some good news. Reliefs will be introduced according to the length of ownership. The allowance will be 5% for shares held for two or three years; 10% for shares held for four to six years, and then increasing by 5% per year of ownership up to 40% by the 12th year.
The period of ownership however only starts from 1st January 2013, so you will not receive any relief for a couple of years.
Income tax scale rates (for 2012 income, tax payable in 2013)
Up to €5,963 - 0%
€5,964 to €11,896 - 5.5%
€11,897 to €26,420 – 14%
€26,421 to €70,830 – 30%
€70,831 to €150,000 – 41%
Over €150,000 – 45%
Income of between €250,001 and €500,000 is subject to a temporary surcharge of 3%, while income over €500,000 suffers an extra 4% tax.
While France does have high headline rates of tax, there are some very tax efficient investment vehicles available to residents that can reduce taxable income and thus income tax and social charges. Depending on your circumstances they may also mitigate French succession tax and law.
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.