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Finance in France – what’s new in 2023?

By Sue Regan
This article is published on: 12th January 2023

12.01.23

Firstly, I would like to wish you all a very happy, healthy and peaceful 2023!

As we are starting a new (tax) year I thought it would be helpful to update you on some changes that may affect you in 2023, both tax related and more generally.

Unsurprisingly, the main purpose of ‘la Loi de Finance’ (Finance Act) for 2023, published on 31st December 2022, is to help protect households and businesses from inflation.

Personal Tax Changes in 2023 for revenue received in 2022

In order to contain the effects of inflation on the level of household taxation, the Finance Act for 2023 has increased the tax brackets of the progressive ‘barème’ scale, applicable to income received in 2022, by 5.4%. That’s almost four times higher than last year. There are no changes to the rates of tax.

Increase in income tax brackets
The progressive barème scale for income received in 2022 is as follows:

Income threshold for single person household Tax rates
Up to 10,777 € 0%
From 10,078€ to 27,478 € 11%
From 27,479 € to 78,570 € 30%
From 78,571 € to 168,994 € 41%
over 168,994 € 45%

As France pools allowances for households of more than one person, the threshold for tax-free income received in 2022 by a household of two will be in the region of 29,000€.

Social charges
There have been no changes made to the rates of social charges for 2023 and they remain as follows:

Employment income 9.7%
Pension income 9.1%
Investment income 17.2%

The special lower rates also remain in place as follows:

Pensions
The rate of social charges on pension income is reduced to 7.4% for those households where taxable income is less than around 2,000€ per month (or 3,000€ per month for a couple). Holders of the EU S1 certificate, and those who are not affiliated to the French health care system, are exempt from social charges on pension income, regardless of the amount received.

Investment income
As above, for holders of the EU S1 certificate, and/or those covered under the health care system of another EU/EEA country, social charges are reduced from 17.2% to 7.5% for investment and property income.

Taxe d’Habitation

Good news for homeowners and renters living in France! The phasing out of taxe d’habitation which began a few years ago will come to an end in 2023, with this property related tax being scrapped for all principal homes in France. This also includes the abolition of the TV licence (contribution a l’audiovisuel public).

However, second-home owners and owners of vacant properties are still liable to pay taxe d’habitation on these properties.

Wealth tax on real estate – Impôt sur la Fortune Immobilière (IFI)

The current threshold of 1,300,000€ will remain in place for 2023 with no changes to the scale rates of wealth tax.

Assurance Vie

There are no changes to the taxation of assurance vie policies or their inheritance planning benefits. Thus, these popular investment ‘wrappers’ remain a very attractive vehicle for both personal taxation and inheritance planning.

Finance in France

So, what else is there to know…………

Energy prices are going up
With inflation in France at its highest in decades and global energy prices having sky-rocketed in 2022, 2023 is set to start with a series of price hikes. Firstly, the 4% cap on energy tariffs went up on 1st January, meaning a potential increase of up 15% on gas and electricity bills. In practice, this means that average household bills are likely to go up by around 20€ a month.

Petrol subsidies come to an end
Petrol prices increase from January, with the government’s fuel rebate ending on December 31st. However, a fuel grant of 100€ is available for low-income workers who rely on their car for work. Full details can be found in this link to the government website Indemnité carburant de 100 € : comment ça marche ? | impots.gouv.fr

Increase in the minimum wage
France’s minimum wage (or SMIC) has gone up 1.8%, putting the gross monthly wage at 1,709.28€ or 1,353€ net. Importantly, this figure is used as the basis for calculating the sufficient funds needed for a French visa, so we can expect the required minimum income to go up accordingly.

Increase in motorway tolls
French motorway tolls are set to go up from 1st February with an average 4.75% increase.

Expected increase to savings interest rates
The interest rate on the popular tax-free savings accounts, the Livret A and the Livret de Développement et Solidaire (LDDS), is re-assessed every six months and it is expected that the rate will be increased to at least 3% per annum on both accounts with effect from 1st February.

France is going paperless
You will have probably already noticed that some stores are asking if you want a receipt or not, and more and more shops are offering the option for an emailed receipt. From April, this more eco-friendly practice will become standard practice at all shops. Thus, if you still require a printed receipt, you will have to specifically ask for one.

Cold call relief
Some better news if, like me, you are constantly being harrassed by cold callers – new regulations from next March mean that commercial phone calls can no longer be made on weekends, evenings after 20h00, or lunchtime from 13h00 to 14h00.

Review your finances

The last few years have been somewhat different to say the least. A global pandemic swiftly followed by war in Europe, both of which we haven’t experienced for generations. These highly unusual events have proved very challenging for many including governments, health workers and investors. The start of a new year is always a good time to review your finances. I am here to help and I would be very happy to sit down with you for a review to ensure that your financial plan is on track to achieve your longer term objectives. Please contact me at sue.regan@spectrum-ifa.com or call me on 06 89 20 32 47.

Have you completed your tax returns in France?

By Katriona Murray-Platon
This article is published on: 3rd June 2022

03.06.22
The tax season is almost over! Those of you living in departments numbered 55 to 976 still have until 8th June at 11.59 pm to submit your tax return online or if you have engaged an accountancy firm to do your tax return they also have another week or so to submit any returns. I would not advise trying to contact an accountancy firm at the moment because they are very busy and they won’t be able to start working on your tax return until the deadline has passed. The best thing is to have a go at it yourself and then correct it later in the year. Your initial return, submitted by the deadline, will result in a tax statement. If you decide to amend the return, you will get an initial tax statement and then later an amended tax statement.
 
Once you have done your tax return you can expect to receive your tax statement as follows:
  • If you submitted it online and you have paid too much tax or exactly what is owed you will receive your statement between 25th July and 5th August.
  • If you submitted by post and you have paid too much tax you will get your statement between 29th July and 31st August;
  • If you submitted your tax return by post but you have paid exactly the right amount of tax you will get your statement between 2nd August and 31st August;
  • If you submitted online but there is still tax to pay you will get your statement between 29th July and 5th August,
  • If you submitted on paper and there is tax for you to pay you will get your statement between 5th August and 26th August.

If you have paid too much tax you should get the reimbursement around these periods. If you have tax to pay it should be taken from your bank account automatically. If not you have until 20th September to pay online. The money won’t be taken out of your account until 26th September. If you owe more than €300 tax, this amount will be taken in four payments between 26th September and 27th December 2022. If the amount due is less than or equal to €300 then this amount will be taken out in one payment on 26th September. Please remember that during September the 9th instalment of your monthly payment of income tax will be taken on 15th September, so you may have two tax payments in September (and in the following months if you owe more than €300).

french tax declaration

A situation was brought to my attention about Capital Gains Tax on the main residence when you leave France. There was a court case in 2017 which reached the French Constitutional Court regarding the exemption from capital gains tax for the main residence. Whereas a French resident may vacate his/her main residence and has 12 months to sell it for it still to benefit from the main residence exemption, according to this decision if you are no longer French tax resident at the time of sale you lose this exemption on the capital gains.

Furthermore under Article 150 U, paragraph 2, line 2, of the French Tax Code the capital gains from the sale of a property are exempt from tax “for the sale of a property situated in France where the seller is an individual, not French resident, a national of a Member State of the European Union or another State which is part of the EEA having agreed with France an administrative assistance agreement to fight against fraud and tax evasion and provided that the person was tax resident in France continuously for at least two years at any period before the sale. The exemption mentioned in the first line of this second line applies only to one property per tax payer and up to €150,000 of net taxable capital gain, to sales carried out:
a) no later than 31st December of the fifth year following the year in which the seller ceased to be tax resident in France,
b) with no time restrictions, when the property is freely available to the seller at least since 1st January of the year before the sale”.

It is this section of the French Tax Code which could, according to some Notaires, no longer apply to British citizens selling their French properties and returning to the UK since Britain is no longer part of the EU. I have spoken to two Notaires about this and neither seemed to be bothered about it. But Notaires can take different views on things. So if you (or someone you know) are planning to sell what is currently your main residence in France and move back to the UK make sure you clarify exactly what you have to do with your local Notaire and do not move back to the UK and establish UK tax residency before the sale is complete.

After a busy month of May with many people contacting me with tax questions, I am looking forward to a more normal month of June and getting out in the sunny weather to see clients. So if you would like to arrange an appointment or need to speak to me about any matters please do get in touch!

Tax in France – what needs to be declared

By Katriona Murray-Platon
This article is published on: 6th May 2021

06.05.21

No-one needs reminding that 2020 was a year like no other. Our lives were changed in many ways and this had an effect on our finances. Luckily there were many government schemes and initiatives to help people overcome the financial difficulties suffered in lockdown and because of the health restrictions. However now that 2021 tax season is upon us, what now needs to be declared?

Salaried workers bonus is tax exempt
Last year some salaried workers may have received a consumer bonus which is exempt from tax up to €1000 (or €2000 if there is an interest agreement/“accord d’intéressement”) Public workers and health workers also received a bonus which is exempt up to €1500.

Overtime hours are usually exempt up to €5000 per year, however the exemption threshold has been increased to €7500 for those hours carried out between the beginning of lockdown (16th March 2020) and the last day of the emergency health state set at 10th July 2020. This applies to salaried workers in the public and private sector as well as those under special regimes. All exempt overtime must still be declared on the tax form and will be included in the tax income reference rate for the tax household.

The Ministry for Economy and Public Accounts has announced that the payments paid by companies to their employees to cover the costs of working from home are exempt from tax up to €2.50 per day worked at home and up to €50 per month for 20 days and €550 per year.

Salaried workers who choose to deduct their actual costs rather than applying the flat 10% abatement on their salaries, can still choose this options without supplying supporting documents however these deductions may not be so beneficial depending on your level of salary. As always it is best looking at both options and seeing which works best for you.

tax what to declare france

Charitable gifts in 2020
Although things were hard for many people last year, it was also a year, more than ever to help those less fortunate. Gifts given in 2020 to humanitarian organisations and victims of domestic violence result

in a tax credit of 75% of the amounts donated up to a maximum threshold of donations of €1000. Over this threshold and for donations given to other organisations (including political parties), the rules haven’t changed, the tax reduction is 66% for such donations and he maximum threshold is 20% of the taxable income. The excess can be carried over over the next 5 years and results in a tax reduction under the same conditions.

Independent workers
Companies and individual tradespeople benefitted a lot from the government help last year. Fortunately the financial help granted by the solidarity fund to companies most affected by the health crisis, the exceptional financial help to independents (CPSTI RCI COVID 19) and those paid by the additional pension schemes of independent professionals and lawyers (CNAVPL and CNBF) are all exempt from income tax. The other help from public or private entities are taxable if there is no specific legal provision that exempting them otherwise.

Auto-entrepreneurs and micro-entrepreneurs who were exempt from paying part of their social charges must include in their tax declaration the turnover figure that was not declared to URSSAF because of this exemption.

Home help tax credit – changes to the conditions
The home help services normally give rise to a tax credit of 50% of the amount paid out. These expenses are deductible up to €12,000 (plus €1500 per dependent and person over 65 years, up to a maximum of €15,000). However in 2020, during lockdown some of these services had to be temporarily suspended or even cancelled, or in certain circumstances could be carried out online.

If you employed someone carry out a service in your home, you may have benefitted from the partial compensation for the hours that your employee was unable to carry out during lockdown. These compensated hours cannot benefit from the normal tax credit and if you nonetheless paid your employee their salary even though they couldn’t actually work, this cannot be used for the tax credit (it is classified as a solidarity donation).

Exceptionally, some services, which in principle took place in the home, but were in fact carried out remotely because of the health crisis, still give rise to the tax credit under the same conditions as other home help services. These include online additional schooling support lessons and individual lessons (gym, music etc) given to adults or children. The Ministry of Economy and Finance has specified that these services “must have involved a minimum amount of effective interaction, implying a physical presence of the person supplying the service at one end of the screen/telephone line and the be specifically given to the person paying for the service at home”. This therefore does not include online group lessons or watching pre-recorded videos online. This derogation applies throughout the time that people were not allowed to go out either because of lockdown or curfew.

Professional landlords who waived rent
If you are a professional landlord and you waived the rent of your tenants for a commercial or professional premises rented to a company that was difficulty because of the Covid crisis, you can still deduct your expenses (ownership expenses and mortgage interest). You also can carry forward your rental loss, up to €10,700, on your overall income. The additional loss – and the part of the deficit arising from the mortgage interest – will be carried forward and deducted from your income over the following 10 years.

There is also a specific tax credit if you definitively waived rent for November 2020 only (not any of the other months in 2020). The tenant company must have employed at least 5000 employees and have been closed to the public (even if they were able to do click and collect) or to have carried out its business in one of the sectors of business that were eligible for the solidarity fund as listed in Decree no 202-371 of 30.03.2020 (hotels, travel industry for example).

Furthermore the tenant company must not have been in financial difficulty on 31st December 2019 or have been under court ordered administration proceedings as at 1st March 2020. The tax credit is equal to half of the unpaid rent if the company employed less than 250 employees. If the number of employees was between 250 and 5000, the 50% is calculated on the two thirds of the rent. If the tenant company is managed by an ascendent, descendant or member of your tax household, you must justify the cash flow problems in order to deduct your expenses and get the tax credit.

Voluntary retirement contributions
You can deduct from your total income the sums paid into a retirement scheme such as PER, PERP or Préfon up to the normal deduction limits. If you have opened a PER for your child (whether a minor or of age but still within your tax household) you can deduct the payments even if they payments were paid by your own parents (the child’s grandparents) Children have their own deduction amounts even though it is not necessarily stated on the tax return.

French Tax Changes 2018

By Spectrum IFA
This article is published on: 23rd January 2018

During December, the French budget completed its Parliamentary process, with little change to the initial proposals. Shown below is a summary of our understanding of the principle changes.

INCOME TAX (Impôt sur le Revenu)
Income tax bands of the barème scale have been increased as follows:

Income Tax Rate
Up to €9,807  0%
€9,808 to €27,086  14%
 €27,087 to €72,617 30%
€72,618 to €153,753 41%
€153,784 and over 45%

The above apply in 2018 in respect of the taxation of 2017 income, for example, pensions and earnings.

SOCIAL CHARGES (Prélèvements Sociaux)
The Contribution Sociale Généralisée (CSG) has been increased by 1.7%. This results in investment income and property rental income (unless exempted by a Double Taxation Treaty), being liable to total social charges of 17.2%. In addition, where France is responsible for the cost of the taxpayer’s healthcare in France, social charges at a rate of 9.1% will be applied on pension income.

FLAT TAX on revenue from capital
The Prélèvement Forfaitaire Unique (PFU) – also known as the Flat Tax – has been introduced. This will be charged on the total amount of interest, dividends and capital gains from the sales of shares, received by the taxpayer. It also applies to certain gains in withdrawals from assurance vie contracts and this is covered in more detail in the following section.

The Flat Tax rate is 30%, made up as follows:
➢ a fixed rate of income tax of 12.8%; plus
➢ social charges at the rate of 17.2%.

However, the option to pay income tax at the progressive barème scale tax rates above (in lieu of the Flat Tax rate of 12.8%), plus social charges of 17.2%, is still possible, but only at the taxpayer’s specific request. In this case, the taxpayer will also benefit from the existing 40% abatement on dividends (but not for social charges).

Capital gains from the sale of shares, no longer benefit from taper relief, where the gain is taxed at the Flat Tax rate.

However, for shares purchased before 2018, where the taxpayer elects for realised gains to be taxed at the progressive barème rates, taper relief will continue to apply, as follows:
➢ 50% for a holding period from two years to less than eight years; and
➢ 65% for a holding period of at least eight years.

This relief also applies to gains arising from the sale of shares in ‘collective investments’, for example, investment funds and unit trusts, providing that at least 75% of the fund is invested in shares of companies.

Likewise, for investments made prior to 2018 in new small and medium enterprises, the higher allowances against capital gains for investments in such companies are also still provided, as follows:
➢ 50% for a holding period from one year to less than four years;
➢ 65% for a holding period from four years to less than eight years; and
➢ 85% for a holding period of at least eight years.

Similarly, the Contribution Sociale Généralisée (CSG) deductible portion (6.8% out of the total social charges of 17.2%) will only be permitted in the case of taxation at the progressive barème scale rates.

Taxpayers will not be able to selectively chose the income that is subject to the Flat Tax and that which is subject to the progressive rates of the barème scale. The default is the Flat Tax and where the taxpayer makes an election for any income from capital to be taxed at progressive rates, this will apply globally. Therefore, careful planning will be needed by some taxpayers, particularly if they intend to make a disposal of a large holding of shares and/or receive a large payment of dividends.
The Livret A, Livret Développement Durable and Livret Épargne Populaire accounts remain exempt from income tax and social charges.

ASSURANCE VIE & CAPITALISATION CONTRACTS
Premiums paid before 27th September 2017
For premiums paid before 27th September 2017, there is no change. Therefore, the taxpayer has the option to be taxed at the progressive rates of the barème scale or the Prélèvement Forfaitaire Libératoire (PFL) rates, as follows:
➢ during the first 4 years at 35%
➢ between 4 years and 8 years at 15%
➢ post 8 years at 7.5%

Social charges at the rate of 17.2% are payable in addition.

For contracts with a duration of at least 8 years, the abatement of €4,600 for a single person, or €9,200 for a couple, continues to apply.

Premiums paid from 27th September 2017
For premiums paid from 27th September 2017, the taxation rate will vary according to the age of the contract, plus for contracts older than 8 years, according to the ‘threshold’ amount of capital remaining in the contract as at 31st December of the year prior to the withdrawal being taken.

The threshold amount is €150,000 per individual person (across all assurance vie policies), which is determined by reference to the amount of the premiums invested, reduced by any capital already withdrawn, and not the value of the contract.

The threshold is not cumulative between persons and therefore, couples who are taxed as a household cannot share in each other’s threshold. Thus, one spouse may reach the threshold level, whilst the other does not, for example, where one has say €200,000 capital invested and the other only has €80,000 invested.

The reform provides for the PFU to apply for assurance vie contracts of less than 8 years, regardless of the amount of the outstanding capital. Thus, the PFU rate of 30% will be globally substituted for the pre-27th September 2017 rates of 52.2% (up to 4 years contract duration) and 32.2% (4 – 8 years contract duration)

Therefore, according to the age of the contract, the following tax rates will apply:
➢ during the first 8 years, the Flat Tax rate of 12.8%
➢ over 8 years, 7.5% up to the threshold, plus 12.8% above the threshold.

Social charges of 17.2% are payable in addition.
Insurers will be obliged to deduct the tax of 12.8%/7.5%, i.e. depending on the duration of the contract, plus the social charges. Subsequently, for contracts older than 8 years and where the taxpayer has exceeded the threshold, any additional tax due will be charged through the taxpayer’s annual declaration.

The following table summarises the situation:

Fixed tax rate applied
Gaines from premiums
paid from 27/09/2017
Deducted by the
insurance company plus
social charges of 17.2%
Additional tax payable
if threshold exceeded
Additional tax payable
if threshold not exceeded
Contracts < 8 years 12.8% No No
Contracts > 8 years 7.5% Yes, to reach 12.8% No

The post 8-year abatement of €4,600 for a single taxpayer, or €9,200 for a couple, continues to apply.

All taxpayers will have the possibility to opt for taxation at the progressive income tax rates of the barème scale, plus social charges, at the time of making their tax declaration. As the insurance company would have already deducted the PFU tax, any excess tax already paid will be refunded following the processing of the tax declaration made in the year following the payment of the withdrawal. However, taxpayers should be aware that if taxation at the progressive rates of the barème scale is chosen for assurance vie gains in amount withdrawn, then this will apply globally to all income from financial capital.

There is no change to the inheritance tax treatment of assurance vie contracts.

Examples of how the taxation will work:

Example 1
Mr X invested €200,000 in his policy in January 2017. In case of redemption after 8 years, as the premium was invested before 27th September 2017, the gain will be taxed at 7.5%, after application of the abatement of €4,600. Social charges of 17.2% on the total gain are also payable.

Example 2
Mr Y invests €200,000 in his policy in October 2017. In case of redemption after 8 years, as the premium was invested after 27th September 2017 and exceeds the threshold of €150,000, 75% of the gain will be taxed at 7.5% and 25% at 12.8%. The abatement of €4,600 will be first applied to the gain taxed at 7.5% and any balance applied to the gain taxed at 12.8%. Social charges of 17.2% on the total gain are also payable.

Example 3
Mr Z invests €100,000 in an assurance vie contract in 2007 and makes an additional investment of €200,000 in 2018. He decides to fully surrender the assurance vie in 2019, when the value of the policy is €360,000. €50,000 of the gain is attributed to the 2007 premium and €10,000 to the premium invested in 2018. Our understanding is that the tax on the total gain of €60,000 would be calculated as follows:

– 2007 premium: (€50,000 – €4,600) x 7.5% = €3,405.00
– 2018 premium: as he has only ‘used’ €100,000 of the €150,000 threshold against the 2007 premium, the balance of €50,000 can be applied to the premium paid after 27th September 2017, which is 25% of the €200,000 invested. Therefore, 25% of the gain of €10,000 relating to the 2018 premium will be taxed at 7.5% and the balance at 12.8%, as follows:

o (€10,000 x 25%) x 7.5% = €187.50
o (€10,000 x 75%) x 12.8% = 960.00

– Total tax = €3,405.00 + €187.50 + €960.00 = €4,552.50

Social charges of 17.2% on the total gain are also payable.

PROPERTY WEALTH TAX (Impôt sur la Fortune Immobilier)
Wealth tax on total assets (Impôt de Solidarité sur la Fortune – ISF) has been abolished and replaced with Impôt sur la Fortune Immobilier (IFI).

IFI will apply only to real estate assets and the principal residence is still eligible for the 30% abatement against its value. Therefore, taxpayers with net property assets of at least €1.3 million would be subject to IFI on taxable assets exceeding €800,000, as follows:

Fraction of Taxable Assets Tax Rate
Up to €800,000 0%
€800,001 to €1,300,000 0.50%
€1,300,001 to €2,570,000 0.70%
€2,570,001 to €5,000,000 1%
€5,000,001 to €10,000,000 1.25%
Greater than €10,000,000 1.50%

 

However, at the outset of the debates on the proposed tax changes, it quickly became clear that MPs were not entirely happy about the idea of replacing ISF with IFI. In particular, for people with substantial wealth, who would also benefit from the Flat Tax, this was considered to be a step too far! Therefore, additional taxes have been introduced on certain luxury goods, for example, yachts and sports cars.

TAXE d’HABITATION
Taxpayers who are not liable to IFI will benefit from reductions in taxe d’habitation, in respect of their principal residence, subject to certain taxable income (Revenue Fiscal de Référence) ceilings not being exceeded. For a single taxpayer, the taxable income limit is €27,000 and for a couple, €43,000.

For those who meet the requirements, their taxe d’habitation will be reduced by 30% in 2018, 65% in 2019 and total exoneration in 2020. Where taxable income is just above the income threshold (up to €28,000 for a single person and €45,000 for a couple), the reduction in the taxe d’habitation will be proportionally reduced.

ENTRY INTO LAW
The changes have entered into law following publication in the Official Journal of France.
22nd January 2018

This outline is provided for information purposes only. It does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action to mitigate the effects of any potential changes in French tax legislation.