General News

2016 French Finance Law

Mar 9 2016

PRINCIPAL CHANGES FOR INDIVIDUALS

Firstly, the progressive scale of income tax rates implemented in 2015 has been very slightly modified, and is applicable retrospectively to income earned in 2015 – with the same 4 rates of taxation applied to global income (with relevant allowances made according to the household situation) :

  • Income up to 9,700€ = 0% income tax

  • Income between 9,700€ and 26,791€ = 14% income tax

  • Income between 26,791€ and 71,826€ = 30% income tax

  • Income between 71,826€ and 152,108€ = 41% income tax

  • Income in excess of 152,108€ = 45% income tax


PROPOSED INCOME TAX REFORM

The French government is due to implement a system of taxation of income at source from 2018 but is currently still deciding how this will work, as the system of household shares and progressive scale of income tax are due to be maintained, making it difficult to calculate in advance the correct tax rate to apply at source. It is likely there will be a fixed deduction according to certain criteria, making this a payment on account, with an adjustment to be made when the definitive tax bill is issued.

It will still be necessary to submit a tax return.

An update on taxation at source is due to be discussed in Parliament in October 2016 and we will endeavour to provide an update on this as soon as further details have been provided.


ON-LINE DECLARATIONS AND PAYMENTS

Over the next few years, the government will be phasing out all postal declarations and payments so that by 2020 all tax returns will be submitted on-line and all payments will either be made on-line or a monthly direct debit will be in place.

From 2016, any household with internet access, where the fiscal household revenue in 2015 exceeded 40,000 Euros, is obliged to submit their return on-line and over the next 3 years this threshold will be reduced until 2019 when the obligation will extend to all households, whatever their fiscal revenue.

From 2016, if your tax bill (income tax, wealth tax, local taxes and social charges) is in excess of 10,000 Euros, you are obliged to pay on-line. In 2017 this will be reduced to payments in excess of 2,000 Euros, in 2018 to payments in excess of 1,000 Euros, in 2019 to payments in excess of 300 Euros and by 2020 this will include any tax bill payment, including local taxes – you will no longer be able to send a cheque, or cash for even the smallest of payments!

It is indicated that the above payment methods will also now be relevant to the payment of all local taxes (taxe d’habitation, taxes foncières).


SOCIAL CHARGES FOR NON-RESIDENTS

Following the European Court of Justice ruling on 26/02/2015 where it was judged that social charges on capital income (including unfurnished rental income and capital gains tax) could not be applied to income earned by non-residents who were registered with the social security in another EU member state, France has now modified the destination of these social charges so that they are attributed to social services that do NOT require contributions. This means that the ECJ ruling cannot be applied to these social charges and the full 15.5% will once again be applicable to this capital income, even for non-residents.

Claims made by non-residents to recover social charges paid in 2013 and 2014 are still on-going. The French tax authorities have demanded a whole string of supporting documentation to prove affiliation to the social security in the other EU member state, making the claims laborious and time-consuming.


TAX CREDITS

With regards to tax credits, there are some changes with regards to renewable energy :
* new categories for expenses made in 2016 :
- high energetic performance boilers replace condensation boilers
- hydraulic energy electricity systems or biomass systems replace wind power systems
* new universal credit rate of 30%

Other longstanding tax credits for childcare, home help and charity donations still apply, under the same conditions as previously.


PRIME POUR L’EMPLOI (LOW INCOME CREDIT)

There is no longer a tax credit given for low income earners – this was available under certain conditions only, up to and including 2014 revenue. This tax credit has been discontinued as part of the 2016 Finance Law, applied retrospectively from 2015 income.

 
WEALTH TAX

There are no changes in the calculation or declaration of Wealth Tax. If your net assets are valued at less than 1.3 million Euros, you have no wealth tax to pay.

However, if your net assets are valued at in excess of 1.3 million Euros, you will have to pay wealth tax on everything over and above 800,000 Euros according to the following table :

  • Total net value of assets not exceeding 800,000 Euros = 0%

  • Total net value of assets between 800,000 Euros & 1,300,000 Euros = 0.5%

  • Total net value of assets between 1,300,000 Euros & 2,570,000 Euros = 0.7%

  • Total net value of assets between 2,570,000 Euros & 5,000,000 Euros = 1%

  • Total net value of assets between 5,000,000 Euros & 10,000,000 Euros = 1.25%

  • Total net value of assets between 10,000,000 Euros = 1.5%

For more specific details related to Wealth Tax, see our separate information sheet on this subject.


Please note that this information is correct at the time of displaying, based on the 2016 Finance Law voted in January 2016. However, as some of the information is only tentative, and as the French law can be changed periodically and retrospectively, further updates may replace or modify these details.