Financial update in France – March 2025

Even though Spring is officially a few weeks away, it certainly feels like it is in the air with the sunnier weather and flowers popping out. We have a large Mimosa tree in our garden which is full of bright yellow, fragrant flowers.

Although it’s ‘better late than never’, we now have a finance law and a budget as of 6th February. The income tax bands have been increased by 1.8% rather than the originally announced 2% as inflation is lower than anticipated.

The new tax bands are as follows:

A new tax; called the “contribution differentielle sur les hauts revenus” (CDHR), has been introduced, and will come into effect next year, for those who earn over €250,000 as an individual or €500,000 pa for couples. This is to guarantee a minimum tax of 20% on their income earned in 2025. Those tax payers who are subject to this tax (i.e. those whose income is largely exempt or subject to the flat tax of 12.8%) have to make an advanced payment of 95% between 1st and 15th December 2025. The exact amount of tax will be calculated in Summer 2026.

A parent, grandparent or great-grandparent can give €100,000 to a descendant without paying tax up until 31st December 2026, subject to certain conditions. The beneficiaries of this gift must use this money in the six months following the gift to buy a new property, or a property soon to be completed or for energy efficient renovation costs to an existing property. If the person does not have children, the money can be given to a niece or nephew. This is in addition to the usual gift allowances. The property purchased or renovated must become and remain their primary residence for the next five years. Since the gift would need to be declared through a notaire, it is important to ask them whether in your situation this allowance can be used.

You can give up to €1000 to charities which provide food, aid, or housing for people in need and get a tax reduction of 75%. Any amounts over this threshold are subject to a tax reduction of 66% up to 20% of the taxable income. The same allowance is granted for donations to charities that protect victims of domestic violence.

There has been much concern from small businesses about the lowering of the VAT threshold to €25,000. This has now been suspended whilst the tax authorities consult with professionals and the minister for the economy has said that for now micro entrepreneurs do not have to make any additional declarations. However the VAT thresholds have already been lowered in the 2024 finance law. In 2025 if your turnover exceeds €85,000 for sales/puchases or lettings or €37,500 for services, you have to charge VAT in 2026 or even in 2025 if you have gone over the threshold of €93,500 or €41,250 respectively.

If you have any questions on any of the matters mentioned above or would like to discuss your own financial situation please do get in touch.