THE FRENCH FINANCE ACT FOR 2018 - INDIVIDUAL CHANGES
The great novelties of the finance law for 2018 are:
- The establishment of a uniform tax rate on income from savings and capital gains on securities,
- The tax relief on the “housing tax”,
- The creation of the “real estate wealth tax” instead of the “solidarity tax on wealth”.
The creation of this tax is an important measure that will be the subject of our next article.
I-TAX REDUCTIONS AND TAX CREDITS:
- The device "PINEL" is extended until December 31st 2021.
We remind you that this law allows investors in rental real estate to benefit from a tax reduction. As of January 1st 2018, this tax credit is only granted to acquisitions or building constructions made in certain municipalities defined by decree (we can provide you with the list).
- The Zero Rate Loan is extended until December 31st 2021. This loan is means tested.
- The rate of tax reduction for the subscription to the capital of SMEs goes from 18 to 25% for the year 2018.
- The extension until December 31st 2018 of the tax credit for the energy transition (energy savings), but the law now excludes the acquisition of oil-fired boilers and glass walls (doors, windows, etc.). However, as a transitional measure, a 15% tax credit is granted on these expenses if they are made between January 1st and June 30th2018.
- A tax credit is granted to disabled persons for their expenses of installing special equipment for the disabled.
II-GENERALIZED SOCIAL CONTRIBUTION (CSG):
The CSG increases by 1.7 points, this increase concerns all incomes. This CSG increase is deductible from the overall income.
The effective dates are as follows:
- Income from activity: As of January 1st 2018,
- Heritage Income: From the 2017 income tax.
A reduction in social security contributions has been put in place to offset this increase.
- Single flat rate on savings income:
- A 30% flat rate levy is now applicable to the following revenues:
- R.C.M “revenus de capitaux mobiliers” (interest and income from securities),
- Life insurance contract products,
- Capital gains on securities.
- Dividends and other fixed income investment products are now subject to a 30% levy. This withholding tax is deductible from the tax due at the same rate.
- Revenues produced by booklets A and similar accounts remain exempt from all taxes.
- Taxpayers can opt for taxation at the progressive scale; this option is interesting for people with low tax on income tax. Do not hesitate to contact us in case of doubt about the interest of this option, the calculation of tax consequences is sometimes complex.
- Capital gains (disposals of company shares) are taxed at the rate of 30% without deduction. However, the 50% abatement for the holding period of the securities and the increased rebates can be deducted under certain conditions provided for by law.
The standard deduction of EUR 500 000 for leaders who are retiring remain applicable until 2022.
- Compensation received in connection with a conventional break:
These benefits are tax-free, such as severance benefits.
- Agricultural profits:
The miscellaneous income can be attached to the agricultural income if they does not exceed 50% of the income of the agricultural activity and 100 000 €.
The tax credit for organic farming is raised to € 3500 as of January 1st 2018.
- Abatement on capital gains on the sale of building lands:
Capital gains on the sale of building lands between January 1st 2018 and December 31st 2020 are subject to a 70% reduction if two conditions are met:
- The land is located in a municipality classified by order of the ministers of housing and budget (we can provide you with the list),
- The assignee undertakes to build residential premises within 4 years.
The reduction rate rise to 85% if the transferee undertakes to build a social housing for at least 50% of the living space.
- Principal residence tax deduction (Taxe d’habitation:TH):
From the year 2018, a portion of taxpayers will benefit from a reduction on the "TH" of the main residence.
This reduction applies to people whose income from the previous year does not exceed 27 000 euros for the first part of the "quotient familial". This amount is increased by € 8000 for the following two half shares and € 6,000 for each additional half share.
The total reduction is :
- 30% of the "TH" in 2018,
- 65% of the “TH” in 2019,
- 100% from 2020.
Taxpayers with a slightly higher income but not exceeding € 28,000 for the first part of the "quotient familial" are entitled to less relief.
- Exemption from the property tax on social housing:
This exemption is extended until December 31st 2018.
In conclusion, we note that the finance law includes other secondary measures for specific categories of taxpayers. However, two important measures have not been addressed in this article, these are:
- The creation of the real estate wealth tax which, as we have already mentioned, will be treated in a next article,
- The introduction of the withholding tax which must be applicable from 2019.
We are at your disposal if you would like some help with those changes and what strategy to adopt in order to reduce your taxes.