Finance in France – what’s new in 2023?

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:

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:

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.

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.