Personal tax measures announced in France

Written by Nicolas de Limbourg 19 September 2012


1 – Introduction of two new tax rates / freezing of the tax scales

Current French tax rates (per part) New French tax rates (per part) as per proposed Tax reform Hollande
0 5963 0 0 5963 0
5963 11896 5,5 5963 11896 5,5
11896 26420 14 11896 26420 14
26420 70830 30 26420 70830 30
70830 41 70830 150000 41
150000 45

The tax scales for income year 2012 would be frozen (please note that the tax rates and tax scales are voted in France at the end of the income year).

2 – Introduction of a temporary additional taxation for taxpayers receiving professional income > EUR 1.000.000

A temporary (2 years) additional taxation at a rate of 75% will be installed for taxpayers with professional income > EUR 1.000.000.

The taxation of 75% will include all other contributions already put in place such as :

  • Exceptional contribution on high incomes (contribution exceptionnelle sur les hauts revenus) (3%-4%) on incomes exceeding € 250.000/500.000 (3% – single / joint taxation) – € 500.000/1.000.000 (4% – single / joint taxation)
  • CSG/CRDS contribution (Contribution Sociale Généralisée / Contribution pour le Remboursement de la Dette Sociale) amounting in total to 8% (5,1% tax deductible / 2,9% non-tax deductible)
  • It is per today unclear how to deal with the integration of the partly tax-deductible CSG/CRDS contribution within the tax rate of 75%

3 – Limitation of the maximum tax reduction for children at charge (quotient familial)

Current situation New tax reform Hollande
The maximum tax benefit for children at charge is capped at: The maximum tax benefit for children at charge will be capped at :
First child EUR 2.336 First child EUR 2.000
Second child EUR 2.336 Second child EUR 2.000
Third child EUR 4.672 Third child EUR 4.000
Forth child EUR 4.672 Forth child EUR 4.000

A family having 3 children at charge will suffer an additional taxation of EUR 1.344 if the income level of the family reaches the maximum tax benefit of the “quotient familial”

4 – Taxation of movable income at progressive tax rates

Current tax system for movable income

  • Dividends :
    • 60% of gross dividend is taxed at progressive tax rates  (to be increased with social security contributions at a rate of 13,5% – French tax residents)
    • By option, dividends can be taxed at a flat rate of 21% (out of social security contributions)
  • Interests :
    • Interests are taxed at a flat rate of 24% (to be increased with 13,5% social security contributions – French tax residents)
    • By option, interests can be taxed at progressive tax rates (to be increased with social security contributions at a rate of 13,5%)
    • To be noted that certain categories of interests fall out of the scope of this option
  • Capital gains on shares :
    • Capital gains are taxed at a flat rate of 19% (to be increased with social security contributions at a rate of 13,5% – French tax residents)

New tax reform Hollande

The proposed tax reform Hollande provides for a (full) taxation at progressive tax rates of interests, dividends and capital gains (maximum taxation at 45% to be increased with social security contributions – French tax residents).

5 – Decrease of tax benefits related to “tax niches”

In line with prior years, the tax benefits related to “tax niches” would be further reduced. As  per today, no further details have been published on this measure.

Please note that the above mentioned measures are not yet voted and will be presented at the “Conseil des Ministres” on 28 September 2012.