Law & Numbers - News Tax

THE GOVERNMENT'S 2011 "BACK TO SCHOOL" PROGRAM

07.09.2011 (France)

THE GOVERNMENT'S 2011 "BACK TO SCHOOL" PROGRAM : TAX INCREASE AND DEFICIT CUT On Wednesday, August 24th, 2011 the French Prime Minister, François Fillion, announced tax and social provisions for a ¤ 12 billions deficit cut. As from September 6th, some of these provisions are reviewed by the Parliament as part of the second Finance Amendement Bill for 2011 (Council of ministers dated on August 31st, 2011). The remaining provisions will be part of the Finance Bill and the Social Security Bill for 2012.

PROVISIONS MENTIONNED IN THE SECOND FINANCE AMENDEMENT BILL FOR 2011 CALLED PLFR (2)



1 - INDIVIDUALS - Removal of the yearly 10 % rebate on real estate capital gains, main abode excluded

Up to now, a 10 % yearly rebate applies on real estate capital gains as from the 5th year of holding i.e. a full tax exemption after 15 years. It is proposed to remove this rebate.

Instead the acquisition price will be reevaluated up to the inflation. The tax exemption on capital gains on the principal abode will survive.

The new provision should apply as of August 25th, 2011, except when an unilateral or bilateral option to buy was signed before August 25th, 2011.

Expected return : 180 million euros in 2011 and 2.2 billion euros in 2012.

Amendements to the bill have been already introduced :
- A 250,000 euros allowance for capital gain on real property owned for more than 30 years
- A reduction of the tax rebate from 10 % to 5 %
- Application of the progressive tax rebate triggering to a total exemption for real property owned for more than 30 years


2 - INDIVIDUALS - Increase from 12.3 % to 13.5 % of social security contributions on passive income

This measure would apply to 2011 earnings.

Expected return: 190 million euros in 2011 and 1.3 billion euros in 2012.


3 - COMPANIES - Restriction to carry-back and carry-forward

The tax losses carried forward would be limited to 60 % of the yearly taxable profits. The excess would be carried forward.

This restriction would only apply to taxable incomes exceeding 1 million euros.

The carry back would be limited to 1 year instead of 3 years.

Expected gain : 500 million euros in 2011, 1.5 billion euros in 2012

An amendment already proposes to exclude small and medium enterprises.


4 - INSURANCE COMPANIES - Removal of the partial special tax exemption applicable to insurance policies called "solidaires et responsables"

Expected gain : 100 million euros in 2011 and 1.1 billion euros in 2012.


5 - AMUSEMENT PARKS - VAT on the admission fees to theme parks would be raised from 5.5 % to the standard rate of 19.6 %

Notice - An amendment already proposed to remove this provision.



OTHER KEY PROVISIONS PROPOSED BY THE GOVERNMENT WHICH SHOULD BE PART OF THE FINANCE BILL AND THE SOCIAL SECURITY BILL FOR 2012



INDIVIDUALS

Creation of a temporary additional income tax on high incomes (3 % tax on incomes exceeding ¤ 500,000 per individual).

This provision would apply to incomes earned in 2011 onwards, until the public deficit is less than 3 % of the French GDP.


COMPANIES

Tax rebate on capital gains on the sale of controlling interests would be reduced from 95 % to 90 %. This provision would apply to gain made in 2011.

Expected gain : 250 million euros




FURTHERMORE :


AMENDEMENTS TO THE PLFR (2) ALREADY INTRODUCED

- Increase from 19 % to 25 % of the flat tax on dividend and interest
- New 46 % individual income tax bracket
- Shift of the temporary 3 % tax on high incomes from the Finance Bill 2012 to the PLFR (2)
- Suppression of the worldwide tax consolidation system
- Creation of a 2 % temporary tax on taxable incomes of companies listed on the stock exchange
- Creation of a tax on financial deals

THE OTHER PROVISIONS IN A NUTSHELL

- Creation of a "FAT tax" on sugar added drinks (This new excise tax, similar to the one applicable to wine, would not apply to water, fruit juice without added sugar and drinks using sweeteners. About ¤ 0.01 per can)
- Overtimes hours would be included in the calculation of the global social tax relief for employers - the related social and tax benefits for employees would be maintained
- Removal of the 30 % rebate on the taxable income of companies taxable in French overseas districts (DOM)
- Increase of Tobacco prices by 6 % in 2011 and in 2012.






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