the French Government announces radical tax reforms
On Tuesday 3 July, the new French Prime Minister, Mr
Ayrault, announced to the French
Parliament some general policy and tax reforms that will
apply in France for the next few years.
As we all know, the Euro crisis continues to impact
countries within the Euro zone and across the wider EU and
France is one of those that has to reduce considerably
its public debt to comply with the European legislation. By the end
of 2012 the French Government has to find approximately €7.5
billion to reduce the public debt and some of the resulting
tax reforms will apply retrospectively from 1 July 2012.
As far as non-French residents are concerned, some of the
measures taken by the Government will directly affect investments
in France. These are listed below.
- Inheritance Tax - the current
Inheritance Tax threshold of €159,325 is now reduced to
€100,000 per child. In practice settlement of estates will be taxed
after deducting a threshold of €100,000 per child. To give you an
example, a person owning a property worth €300,000 with two
children would not have been subject to any tax after his death.
With the new regime the children will now have to pay approximately
€20,000 to inherit the property.
- Income tax/Capital Gains Tax - one
of the other points that was decided by the French
Government was to apply the French social contribution to
reduce the public debt to Non-French Residents when they receive an
income on a French property or sell it with a gain.
Any non-French resident will now have to pay an additional
15,50% tax on their French Income or Capital Gain. For instance the
sale of a French property was subject to a tax of 19% on the
gain. From the 1 July the gain will be taxed at 34,50%. We have yet
to receive the new scale regarding allowances and exemption of
Capital Gains Tax for the resale of a second home in
- Wealth tax - the Government intends
to apply a different tax this year partly reinstating
the regime that applied before 2011. Basically the previous
regime started from €800,000 where the Sarkozy regime applies
from €1.3 million. The calculation of the either tax is
to be fixed by the Government in the next few days.
did you know that we can complete your French Wealth Tax Return
If you have more than 1.3 million Euros of assets in France, and
you are not a French resident, you have until 31 August to send the
relevant tax form with your payment to the French revenue. Please
Slavov in the team.