FINANCE ACT FOR 2020: MAIN PROVISIONS CONCERNING PERSONAL TAXATION
We present below some of the main measures adopted in the French finance law for the year 2020.
The provisions presented relate to:
- The taxation of individuals;
- Local taxes.
The specific measures concerning companies will be explained in our next article, which will appear in two weeks.
I - TERRITORIALITY OF INCOME TAX
- Domiciliation in France of directors of large companies
From 2020, the directors of companies with annual turnover of more than € 250 million and whose head office is located in France, will be considered French residents for tax purposes.
- Simplification of reporting obligations in terms of income tax
Henceforth, persons whose total income is declared by third parties (wages, income from movable capital, etc.) will be assumed to have subscribed their income declaration once the administration has informed them of the amounts declared by third parties.
The taxpayers concerned will always have the possibility of sending a corrective declaration.
II - TAX REDUCTIONS AND TAX CREDITS
- Subscription to the capital of small and medium-sized enterprises
The period for increasing the tax reduction rate from 18 to 25% is extended until December 31st 2020.
- Tax reduction for investment in rental housing ("PINEL" device)
From January 1st 2021 this tax reduction can be obtained only for investments in collective housing buildings.
- Arrangements of the "DENORMANDIE" system
This device is extended until December 31st 2021.
The obligation to invest in housing located in city centers has been removed. It will be enough to invest in a municipality where the need for housing rehabilitation in the center is important.
- Tax reduction for donation
A case of tax reduction at the rate of 75% is planned for payments made between January 1st 2020 and December 31st 2021 with organizations that act in favor of victims of domestic violence.
- Energy transition tax credit
- A bonus is created from 2020. It will be paid, subject to resources, to modest households during the execution of works.
- The tax credit is extended for 2020 for households not eligible for the premium receiving intermediate incomes.
The annual reference income must be between two ceilings. For example, for a person living alone outside the "Ile de France" region, the income must be more than € 19,074 and less than € 27,706.
Tenants are now excluded from the tax credit.
It should also be noted that the list of eligible expenses has been changed.
- Two categories of expenses still allow you to benefit from the tax credit without means test, which are:
-Charging system for electric vehicles;
-Purchase and installation of thermal insulation materials for opaque walls.
- The amount of the tax credit is capped for the same accommodation at the sum of € 2,400 for a single person or € 4,800 for a couple for a period of 5 years (from 2016 to 2020).
III - SALARIES
New exceptional purchasing power premium:
It is a bonus that the employer can pay to its employees. It’s tax exempt provided that it is paid between January 1st and June 30th, 2020 on the basis of a profit sharing agreement concluded with the employees.
-The employee must receive remuneration less than three times the minimum wage;
-The premium is exempt up to a limit of € 1000 per beneficiary;
-The premium is exempt from income tax and all social security contributions.
IV - AGRICULTURAL BENEFITS
When switching from a real scheme to the micro BA scheme, the operator may deduct the amount of claims appearing in the balance sheet for the last financial year imposed under the real scheme. In fact, according to the micro BA regime, the revenue collected is taxed, and thus these claims will be taxed under the new micro regime.
Conversely, when switching from the micro to the real regime, the claims are added to the profit for the first financial year subject to the real regime. These receivables will benefit from the 87% reduction.
This regime is applicable from January 1st 2020.
V - NON-COMMERCIAL BENEFITS
When changing the tax system (change from micro BNC to the system of controlled declaration or vice versa) when the professional opted for the taxation of receivables, the same principles apply as in terms of agricultural profits (see above).
VI - REVENUE FROM MOVABLE CAPITAL
The income received on life insurance contracts concluded before 1983 are no longer exempt.
Premiums paid from October 10th 2019 are taxable according to the life insurance plan at the rate of 7.5% after deduction.
VII - CAPITAL GAIN ON SECURITIES
The contribution-disposal to a company regime has been adjusted.
VIII - SOURCE LEVY
- Taxpayers can decrease the amount of their levy as soon as the estimated levy based on the income of the current year is more than 10% lower than that which would be applied.
From 2020, no minimum difference is required.
- It is now possible to ask the tax administration to decrease the amount of the deposit to be collected on tax reductions and credits. This request must be made before December 1st of the year preceding that of the payment of the deposit.
- From 2020, taxpayers established in a state which is not a member of the European Union with which France has a tax assistance agreement, are exempt from accrediting a tax representative in France for the payment of the source levy.
IX - LOCAL TAXES
- Housing tax
Several measures are being taken to achieve the abolition of the housing tax for all taxpayers from 2023.
In around 80% of homes will be exempt in 2020 from the tax on housing of their main residence. The exemption will then be progressive in 2021 and 2022 for the 20% of taxpayers who are still subject.
From 2023, the exemption will be total for primary residences, but new reporting obligations will be put in place for secondary residences which will continue to be taxed.
- Property tax
Local authorities have the option of exempting housing built before January 1st 1989 which has been the subject of insulation work eligible for "CITE".
We have presented only a general overview of the main measures of the finance law of interest to individuals. You can of course question us for some explanations on a provision that would concern you.