Law & Numbers - News Tax


08.11.2010 (France)

THE END OF TAX NICHES AND OTHER MEASURES The finance bill under debate at the French National Assembly confirms the end of 22 tax niches, with a global decrease of 10% of the credits and other income tax cuts, except those aiming to preserve employment (household employees, care expenses for young children).

The general tax niches' cut should be completed by a tax increase in the form of a contribution on both high and capital incomes . The budget revenue following this general planing of the niches as well as other measures provided by the finance bill for 2011 should normally be of about 10,88 billion Euros for 2011, and will be borne for up to 38% by households and up to 62% by companies. The revenues that will issue out of some of these measures will only be visible in 2012, and the tax burden will then be more equally shared : 48% by the households, 52% by companies. Main measures regarding individuals include :

• Creation of a contribution on both high and capital incomes that will take place through a 1 point increase of the following rates :

- The marginal rate of income tax would go from 40 to 41% ;

- The rate of the final withholding tax, applicable among others but essentially to interests and dividends would go from 18 to 19% ;

- The proportional rates applicable to real estate and capital gains would respectively go from 18 to 19% and from 16 to 17%. This additional contribution wouldn't be taken into account for the tax shield.

• Global decrease of 10% of the credits and tax cuts. So as to preserve employment, household employment and care expenses for young children will not be concerned by these cuts. Also, to preserve fragile publics, rental investment in overseas social housing will also not be concerned. Gain regarding this planing of the tax niches : 430 million Euros. This reduction of tax advantages will not be taken into account for the tax shield.

For example, the tax reduction rates regarding the “Scellier” rental investment would be as follows :
Building meeting the BBC standards : 25 % if acquired in 2009, 25 % in 2010, 22,5% instead of 25% if acquired in 2011 and 18% instead of 20% if acquired in 2012.
Building not meeting the BBC standards : 25 % if acquired in 2009, 25 % for 2010, 13,5% instead of 15% for 2011and 9 % instead of 10 % if acquired in 2012.

• Suppression of the triple tax return for couples married, divorced or becoming partners that same year starting 2012. Expected gain : 500 million Euros.

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

• Suppression of the income tax credit alloted for dividends (50% of the amount of the dividends, capped at 115 for singles and 230 for married couples). Estimated gain : 645 million Euros.

• For Triple-Play bills (TV, Internet, phone), the segment that until now benefited from a reduced VAT rate at 5,5% will be taxed at the normal VAT rate, 19,6%. This increase in taxation should make for a budgetary revenue of 1,1 million Euros (of which 550 million will come from companies). The operator Free announced it's intention to qualify this increase in it's rates of “Baroin Sarkozy” tax.

• The tax credit attached to the amount of investments in photovoltaic equipments should decrease from 50 to 25%. 150 million Euros for 2011 and 850 million Euros for 2012 should come out of this measure.

• Merger of what was beforehand the zero-interest loan, of the tax credit on loan interests and of the Land-Pass into a new zero-interest plus loan (PTZ+ in French short code) the scope of which still needs to be defined. This measure should bring 600 million Euros starting 2012.

• Refocus of the income and wealth tax reductions for subscription to SME capital so as to prevent abusive situations and to improve the transparency of the devices.

• Life insurance contracts will now be subject to social security contributions (12%) for their Euro part at the entry, and no longer at the termination of the contract. Principal measures regarding companies

• Decapping of the 5 % fees and charges currently capped at the fees and charge really invested in the French parent-subsidiary regime. Gain for the State : 200 million Euros.

• Reintroduction in the company cars tax's scope of vehicles registered under the “N1” category, that are destined for people transportation; the category concerned essentially luxury vehicles and 4x4.

• Sustainability of the immediate reimbursement of research tax credit for EU SMEs.

• Total deductibility of concession fees from patents or of patentable inventions between related companies.

• Establishment of a systemic tax on banks, the base of which would be risk-weighed assets. Expected gain : 500 million Euros in 2011.

• Adjustment of exemption devices in Rural Area Revitalization Zones (RARZ) and Area for Regional Support Zones (ARSZ).

Voting calendar of the Finance Bill for 2011 : the debate going on at the French National Assembly since October 18th regarding the first part of the Finance Bill for 2011 should end on October 25th. The second part of the project should be examined starting November 2nd; a solemn vote on the whole of the project is to take place on Wednesday November 17th. The examination of the Bill for Social Security Funding in 2011 started on October 19th. The solemn vote regarding the bill should take place in the week of the 25th to the 29th of October.

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