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Disclaimer
Tax law is complex and every effort has been made to offer information
that is current, correct and clearly expressed. The information
in this summary is intended to be no more than a general overview
of the position and certain details have been deliberately omitted.
The contents of this page should not be taken as an authoritative
statement of French tax law and practice. Neither the author nor
the publisher are responsible for the results of actions taken on
the basis of information contained in this summary, nor for any
errors or omissions. This text is not intended to render legal,
accounting or tax advice. Readers are encouraged to seek professional
advice concerning specific matters before making any decision.
Wealth Tax
French residents whose net assets exceed a certain level are liable
to pay an annual wealth tax. This tax is calculated by referring
to an individual's worldwide wealth, after deduction of liabilities.
However, there are exemptions for business assets and works of art,
subject to the proviso that a number of specified conditions are
met. Take note: as a result of tax treaties some expatriates
may be exempt from wealth tax.
If an individual's net worldwide assets are in excess
of €720,000 the excess is subject to a progressive tax which starts
at 0.55% and rises to a maximum of 1.8% for the top slice of net
assets in excess of €15 million.
Assets include all land and property, shares etc after deduction
of liabilities, in the case of a house its value for tax purposes
would be after deduction of any mortgage.
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Inheritance
and Gift Tax
What are these taxes?
In general terms, inheritance tax will be levied on the inheritance
of assets after the donor's death and gift tax applies to a gifts
made during the donor's lifetime.
When does the tax arise?
As a general rule:
- If the donor was resident in France at the time the gift was made;
or
- If the recipient was resident in France at the time the gift was
made; or
- If the gift comprises assets located in France
then tax will be payable.
What is taxable?
Tax is payable on gifts or inheritance of worldwide assets. However,
for the purposes of inheritance tax only, tax is calculated on the
net value of the asset, after deduction of liabilities. Further,
it is subject to the application of international tax treaties to
prevent double taxation.
What is the rate of tax?
The available allowance and the rate of tax depend on a number of
factors: principally, the recipient's relationship to the donor
needs to be established to determine the recipient's personal allowance.
A spouse's personal allowance is currently €76,000.
This is reduced to €46,000 for parents and children. The balance
in excess of the allowance is taxed at progressive rates from 5%
up to a maximum of 40%.
For more remote family members and others, smaller allowances are
given and higher rates of tax will apply. Generally the tax ranges
from 35% to a maximum of 60%. Broadly, the rate of tax that
is applied to gifts is the same as for inheritance tax.
What exemptions may apply?
The most important relief from inheritance tax are the international
tax treaties that provide relief from double taxation. There are
some other limited exemptions from inheritance tax but these exemptions
are subject to a specific conditions being satisfied.
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Capital Gains
The tax on capital gains is complex but the basic
elements can be summarised as follows:
When will it apply?
Capital gains made on the sale of certain assets are subject to
French income tax and certain specific social taxes known as the
"CSG" and "CRDS". As a result, gains made on the disposal of certain
assets must be declared when completing the annual tax return.
What is a "gain"?
Put simply, a gain is the difference between the original purchase
price and the eventual sale price. The costs and expenses of the
purchase and sale, and certain expenses during the period of ownership
can be deducted for the gain.
Additional discounts may apply to real property, as
set out below.
What are "certain assets"?
The are two principal categories of personal assets:
- Real property - a house, an apartment or land; and
- Investments - stocks, shares etc.
Other assets might be liable to tax on any gain and
include works of art and bullion.
What is the position of residents?
If the taxpayer is resident for French tax purposes:
A gain realised on the disposal of real property may have the benefit
of allowances before being taxed at the progressive income tax rates.
(See the French Income Tax pages for details of the progressive
rates.)
A gain realised on the disposal of investments will have the benefit
of minimal allowances and, in essence, will be taxed at a flat rate
of 26%.
What is the position of non-residents?
If you are non-resident but living in the EU, for French tax
purposes:
A gain realised on the disposal of real property will be taxed
at a flat rate of 16%. The notaire instructed to act on the
sale is a public official, and as such he is obliged to act
as the tax collector, and will withhold the tax due on the
gain. The gain on the disposal of investments are essentially
tax free in France, although substantial shareholdings in
private limited companies, i.e. a shareholding of 25% or more,
may be subject to tax at the rate of 16% subject to the provisions
of the relevant tax treaty.
Are there any reliefs or allowances?
Yes. For residents selling their home in France any gain may not
be subject to tax, if the property was their principal private residence.
For both residents and non-residents, a gain on the disposal of
real property may be subject to the following discounts:
The purchase price and costs incurred on the purchase are
increased by a coefficient factor set out in published tables
to discount for the effects of inflation; and a discount of
10% a year is allowed after the fifth year of ownership, with
the effect that after 15 years any gain is not chargeable
to tax.
In certain circumstances a gain made on the sale of a second home
may also be exempt, providing a number of conditions are satisfied,
including that the individual does not own a principal residence.
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