Law & Numbers - News Tax

FINANCE LAW FOR 2011 - FINANCE AMENDMENT LAW FOR 2010 (4)

28.01.2011

TAX NICHES AND OTHER MEASURES

I - FINANCE LAW FOR 2011


Main measures for individuals

• CREATION OF A CONTRIBUTION FOR HIGH INCOMES

This contribution takes the following forms:
the increase from 40% to 41% of the marginal income tax rate, applicable starting the taxation of the 2010 revenues (tax return to be filed in 2011)
the increase from 18% to 19% of the witholding tax such as applicable notably to interest and dividends for income realized starting January 1st 2011
the increase of the tax rate applicable to capital and real estate gains to 19%, applicable to the gains realized through the sales that take place starting January 1st 2011 (Change from the initial Finance Bill for 2011 - All rates are aligned on 19%)
This additional contribution will not be taken into account for the calculation of the restitution right contribution in the tax shield framework.

• 10% PLANING ON THE TAX NICHES

Global reduction of the credits and tax cuts starting the taxation of the 2011 revenues. So as to preserve employment, household employment and care expenses for young children are not concerned. Rental investment in oversea social housing will also not be concerned. The expected gain is of 430 million euros.

This reduction of tax advantages will not be taken into account in the framework of the tax shield.

For example, the tax reduction rates regarding the "Scellier" rental investment are as follows :

Acquisition date 2009 2010 2011 2012
Building conform to the BBC standards 25 % 25 % 22.5 % instead of 25 % 18 % instead of 20 %
Buildings not conform to BBC standards 25 % 25 % 13.5 % instead of 15 % 9 % instead of 10 %


• SUPPRESSION OF THE "WEDDING GIFT"

Suppression of the triple tax return for the year of marriage, divorce or partnership starting the taxation of the 2011 revenues, i.e. for changes in family situation starting January 1st 2011. Expected gain : 500 millions euros.

• TAXATION OF THE GAINS MADE ON SALE OF MARKETABLE SECURITIES STARTING THE FIRST EURO

Taxation of the gains made on the sale of marketable securities whatever the amount of that sale might be (25 830 for 2010). This measure, that comes into force starting January 1st 2011, should contribute to the retirement funding for an amount of 180 million euros.

• SUPPRESSION OF THE INCOME TAX CREDIT ALLOTED FOR DIVIDENDS

The tax credit was equal to 50% of the dividends, capped at 115 for singles and 230 for married couples.
Its suppression will become effective starting the taxation of the 2010 revenues.

• VAT AT THE NORMAL RATE FOR PART OF THE TRIPLE PLAY BILLS

Transition from the 5,5% to the 19,6% VAT rate for the segment of the Triple-Play bills (TV, internet, phone) that benefited from the reduced VAT rate until now. This increase should constitute a bugetary revenue of 1,1 billion euros (of which 550 million will originate from companies), starting January 1st 2011.

• DECREASE IN THE TAX CREDIT FOR PHOTOVOLTAIC EQUIPMENTS

The tax credit attached to the amount of the investments in photovoltaic equipments decreases from 50% to 25% for all investments realized after September 29th 2010. The government is expecting 150 million euros for 2011 and 850 million euros for 2012 as a consequence of this measure.

• CREATION OF THE PTZ+ LOAN

The former zero-interest loan and the tax credit on loan interest for the income tax merge into a "zero-plus rate" loan (PTZ+). This measure should bring 600 million euros starting 2012.

• REFOCUS OF THE INCOME AND WEALTH TAX REDUCTIONS regarding the subscription to SME capital, so as to prevent abusive situations and to improve the transparency of the devices for subscriptions realized starting October 13th 2010.

• SOCIAL SECURITY CONTRIBUTIONS APPLICABLE TO THE EURO PART of life insurance contracts now take place when credited on the account and no longer at the termination of the contract.


Main measures for companies


• PARENT-SUBSIDIARY REGIME : FEES AND CHARGES

Abolition of the possibility to cap the amount of fees and charges truly invested (the suppression of the possibility to cap the fees and charges applies starting fiscal years ending on December 31st 2010. i.e. to dividends received throughout 2010). Expected gain : 200 million euros.

• SCOPE EXTENSION FOR THE THIN CAPITALIZATION RULES

Extension of the thin capitalization rules of article 212 of the French Tax Code to loans contracted with a third party company, but guaranteed by a related company. There exist two exceptions (bonds emitted in the framework of a public offer in the sense of article L411-1 of the French Monetary and Financial Code and a mandatory refinancing of LBOs in the framework of a shareholders' control change).
This disposition comes into force for fiscal years closed on December 31st 2010, or starting January 1st 2011 for some type of LBO transactions.

• TAX ON COMPANY CARS : N1 TYPE VEHICLES SUBMITTED TO TAXATION (Expected gain : 40 millions euros)

• ADJUSTMENTS FOR R&D TAX CREDIT

Among those adjustments can be counted :
• The sustainability of the immediate reimbursement of the R&D tax credit for SMEs only
• The operating expenses is from now on evaluated at 50% of the staff costs and 75% of the depreciation charge of the assets allocated to R&D projects
• The decrease of the advantage alotted for the first two years of the R&D tax credit : 40% instead of 50% the first year and 35% instead of 40% the second year

These adjustments are applicable to expenses incurred starting January 1st 2011.

• INTELLECTUAL PROPERTY
Total deductibility of concession fees from patents or of patentable inventions between related companies, under the condition that the concessionary effectively exploits the patent
Extension of the long-term regime to sub-concessions
Extension of the long-term regime to improvements made on patents and patentable inventions
Harmonization of the rules applicable to capital gains on disposal of property rights regime for companies subject to income tax with companies subject to CIT: exclusion of the long-term regime when companies are related parties
Applicable to fiscal years open starting January 1st 2011.

• ESTABLISHMENT OF A SYSTEMIC TAX ON BANKS

The base of this systemic tax on banks will be the risk-weighted assets. These dispositions will be applicable starting January 1st 2011. Expected gain : 500 million euros in 2011.

• ALTERNATIVE MINIMUM TAX "IFA" : THE SUPPRESSION OF THE IFA FOR CERTAIN COMPANIES IS POSTPONED UNTIL JANUARY 1ST 2014

Suppression of the alternative minimum tax "IFA" for companies whose net-of-tax turnover, including financial products, is equal to 15 000 000 minimum.

• TAX CREDIT FOR PROFIT-SHARING

From now on the tax credit will benefit only to companies with less than 50 employees and its rate goes from 20% to 30%.
This measure is applicable to bonuses paid starting January 1st 2011.

• THE ECONOMIC TERRITORIAL CONTRIBUTION (ETC) : ADJUSTMENTS

Among the various adjustments can be noted :
Enterprises' Land Contribution (ELC): the minimum rental value is of 100% in case of restructuring between linked companies (new mecanism under article 1518B)
ELC: Increase of the minimum ELC contribution which is decided upon deliberation of the town council : amount between 200 and 6 000 for taxpayers, the net-of-tax turnover of which for the referential period exceeds 100 000 ; maximum amount of 2 000 for other taxpayers
ELC: spontaneous payment of the ELC June 15th installment: suppression of the Tax Authorities' obligation to send the taxpayers an ELC installment notice at least one month prior to the payment due date
Enterprises' Added Value Contribution (EAC): exception to the principle of annual tax payment in case of contribution, activity transfer, division of business, universal transfer of assets, the beneficiary of the activity transfer will be submitted to the payment of the EAC for the year of the operation, even should he have had no taxable activity on January 1st of that year
EAC: consolidation of the turnover of integrated groups to determine the threshold and the scale of the EAC applicable to each member company

Adoption and publication of the Finance Law for 2011

The Finance Law was adopted on December 15th 2010. It was published on december 29th 2010.



II - FINANCE AMENDMENT LAW FOR 2010 (4)


Main measures for individuals

• WITHOLDING TAX ON NON-RESIDENTS' OPTIONS' BENEFITS

Will be subject to a witholding tax, benefits realized starting April 1st 2011 by non-residents, and originating from the exercise of stock-options or from the attribution of bonus shares.

• RECOURSE TO A DECLARING THIRD-PARTY

It is possible to have recourse to an authorized professional to give the Tax Authorities the required justifications in case of an electronic declaration.

• IMPLEMENTING RULES OF THE "SCELLIER" TAX CUT

The decrease from 25% to 15% of the "Scellier" tax cut, that should apply to buildings acquired in 2011 and that do not conform to BBC standards, will not be applicable if a pre-contract is signed and registered with the Tax Authorities before December 31st 2010 and if the sale contract is signed before January 31st 2011.

• SUPRESSION OF THE FILING OBLIGATION for submitting a return within the six months of the death, starting 2011.

• CAPITAL GAINS ON SHARES DISPOSAL : ADAPTATION OF THE ARTICLE 150 O D TER RULES TO THE PENSION REFORM FOR RETIRING SME EXECUTIVES

The condition that the retirement should take place in the two years following the disposal is softened and the delay of the two years following or preceeding the disposal is prolonged, under certain conditions, until the moment where the transferor is entitled to a pension.

• TRANSFER OF ASSETS IN A FAMILY OWNED CORPORATION

For transfers realized starting January 1st 2011:
Extension of the scope for the exemption of share transfer of more than 25% to the transfer of shares emanating from companies established in the European Union or in a member state of the EEE
The exempted capital gains are submitted to social contributions

Main measures for companies

• THE REFORM REGARDING FRENCH PARTNERSHIPS HAS BEEN POSTPONED

• SUPPRESSION OF THE BALANCE THEORY EFFECTS FOR INDIVIDUAL ENTREPRENEURS (starting fiscal years open on January 1st 2012)

• NEW CONSOLIDATION REGIME AVAILABLE TO THOSE SUBSCRIBING TO THE VAT PAYMENT OPTION IN CORPORATIONS STARTING JANUARY 1ST 2012


Tax Audit

• REINFORCEMENT OF THE CONTROL PROCEDURES

• Through an adjustment of the judicial procedure for tax investigations
• Through the adaptation of the taxation mecanisms for illicit trafficking
• Through the extension of the communication right


Adoption and publication of the Finance Amendment Law 2010 (4)

The 4th Finance amendment law for 2010 was adopted on December 21st 2010. It was published on December 29th 2010.






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