Finance act for 2024 – Main provisions concerning Personal taxation

We present below the main measures of the French finance act for 2024 (law n°2023-1322 of December 29^th 2023). 

This article has three chapters:

• Tax Calculation Measures
• Measures concerning certain tax categories
• Miscellaneous provisions

This law also includes other measures that we don’t feel are relevant enough to explain here. However, we are obviously at your disposal to provide you with more details on your request!

I. Tax calculation measures

1. 1. Calculation of income tax

Scale: as every year, the law provides for indexing the income brackets of the income tax (IR) scale, as well as the thresholds and limits associated with it, on the forecast of changes in the consumer price index excluding tobacco for 2023 compared to 2022, an increase of 4.8%.

Withholding tax – Application of the individualized rate: currently the tax rate is identical for spouses or partners linked by a PACS, it can however be individualized at the request of taxpayers. The law reverses the current process, it therefore provides for the automatic application of the individualized rate, while providing the possibility for the taxpayers concerned to opt for maintaining a common rate for the tax household.
The entry into force of this measure is scheduled for September 1^st 2025.

1. 2. Tax reductions

Various previous tax reduction measures are extended, these are as follows:

• Tax reduction granted for capital financing of audiovisual cinematographic works, extended until December 31^st 2026;
• “Malraux” tax reduction for buildings located in degraded neighborhoods. The application of this tax reduction is extended until December 31^st 2024;
• “Denormandie” tax reduction for old housing. The application of the tax reduction is extended until December 31^st 2026.

Other tax reduction measures are extended and/or subject to modification, these are:

• Tax reduction granted for donations made by individuals: the law extends until December 31^st 2026 the ceiling increased to €1,000 (instead of €552) of income tax reduction for donations to organizations aid to the most deprived. This system allows tax exemption of up to 75% of payments made to associations helping the most deprived.
  
  In addition, the tax reduction rate is increased to 75% for donations made between September 15^th 2023 and December 31^st 2025 for the benefit of the “Fondation du Patrimoine” with a view to ensuring the conservation and restoration of real estate heritage religious belonging to municipalities in mainland France with less than 10,000 inhabitants or to overseas municipalities with less than 20,000 inhabitants. These payments are retained within the limit of €1,000 per year.

• Donations made by individuals and businesses: the tax reduction is extended to donations for the benefit of works or organizations of general interest contributing to “equality between women and men”.

A device is subject to several modifications: Subscription to company capital.
We indicate below the main characteristics as they are now codified.

• “Common law” regime: Tax reduction of 18%
  Taxpayers domiciled for tax purposes in France can benefit from a reduction in their income tax equal to 18% of payments made for:
  • Cash subscriptions to the initial capital of companies or to capital increases of companies of which they are neither partners nor shareholders.
    In addition, capital increases of a company of which they are associates or shareholders are permitted when these subscriptions constitute a follow-on investment, including when said company has been carrying out its activity on a market for more than ten years after its registration or more seven years after its first commercial sale, carried out under several cumulative conditions indicated in the law.

• • Subscriptions to equity securities in certain production cooperative companies or in other cooperative companies governed by Law n°47-1775 of September 10^th 1947 establishing the status of cooperation.
    
    Subscriptions must only confer on subscribers the rights resulting from the status of shareholder or associate, to the exclusion of any other consideration, in particular in the form of capital guarantee, preferential rates or priority access to goods, products or services provided by the company.
    
    The law also mentions a large number of conditions that must be met by the company receiving the contributions as well as the conditions for obtaining the tax credit in the event of subscribing to the capital of a holding company. We do not indicate them here but we can provide them to you upon your request.
    
    Payments giving entitlement to the tax reduction are withheld within the annual limit of €50,000 for single, widowed or divorced taxpayers and €100,000 for married taxpayers or those bound by a civil solidarity pact subject to joint taxation.
    
    The benefit of the tax advantage is subject to the taxpayer retaining the securities received in return for his subscription to the capital of the company until December 31^st of the fifth year following that of the subscription.

• Special regimes
  • Young innovative companies: the tax reduction rate is increased to 30% for payments up to €75,000 for single, widowed or divorced taxpayers and €150,000 for married or related taxpayers by a PACS and subject to common taxation. However, the total benefit cannot provide a reduction in tax due of more than €50,000 over the period from January 1^st 2024 to December 31th 2028.
    
    
  • Young innovative companies making 30% of research expenses: the tax reduction rate is increased to 50% under certain conditions. Payments are withheld up to an amount of €50,000 for single, widowed or divorced taxpayers and €100,000 for married taxpayers or those bound by a civil solidarity pact and subject to joint taxation and the total of the advantage cannot provide a reduction in tax due of more than €50,000 over the period from January 1^st 2024 to December 31^st 2028.

1. 3. Tax credits

• Expenditure on assistance to people: the tax credit for housing adaptation is extended for two years and its scope is refocused on the most vulnerable intermediate households. Furthermore, households with the highest incomes will no longer be able to benefit from it from January 1^st 2024.
  Equipment specially designed to make housing accessible to the elderly and disabled is therefore no longer eligible for the tax credit.
  The tax credit applies provided that the taxpayer or a member of their tax household is aged 60 or over and suffers from a loss of autonomy or (if they are under 60) has a rate disability greater than or equal to 50% determined by decision of the commission for the rights and autonomy of disabled people.
  This (reformed) tax credit is renewed until December 31^st 2025 and is applicable to the income tax due for 2023.
• Carrying out work to strengthen housing against technological risks: this tax credit is extended until December 31^st 2026.
• Tax credit for the acquisition and installation of charging systems for electric vehicles: from January 1^st 2024, the tax credit ceiling is increased to €500 (instead of €300). However, only “controllable” electric charging stations are now permitted.
  
  

II. Measures concerning certain tax categories

1. 1. Income from movable capital

We simply point out the establishment of a “Future-Climate Savings Plan” relating to green industry and reserved for young people under the age of 21.

1. 2. Non-commercial profits

Taxation of activities linked to the development of digital assets (crypto-assets): the law establishes for professionals a reporting obligation, concomitant with the declaration of results, relating to the references of digital asset accounts opened, held, used or closed with companies, legal entities, institutions or organizations established abroad (like the system currently planned for individuals).

1. 3. Salaries and wages

• Coverage by the employer of fuel costs: the advantage resulting from the cover by the employer of fuel costs or costs incurred for powering electric, plug-in hybrid or hydrogen vehicles incurred by employees is exempt from tax up to the overall limit of €600 per year, including a maximum of €300 for fuel costs.
• Tip exemption: this exemption is extended until December 31^st 2024.

1. 4. Real estate capital gains

• Transfer to social organizations
  The exemptions are extended until 2025 and some details are added to the system:
  • Transfer to organizations committed to providing social housing:
    • Transfer to HLM and similar organizations: the assignees undertake personally, within ten years, to carry out construction.
    • Transfer to any other assignee: commitments to carry out construction must be fulfilled within four years.

• • Transfer to a local authority: the exemption is calculated in proportion to the living space of the social or intermediate housing intended to be built. The benefit of the exemption is subject to the condition that the property is transferred, within one year following its acquisition, extended to three years for transfers made by a public land establishment.

• Reduction for the transfer of building lands
  • A 60% reduction is applicable on capital gains resulting from transfers of building lands in application of town planning regulations, built real estates or rights relating to these same properties, located, for all or part of their surface area, in municipalities classified by order of the ministers responsible for the budget and housing in geographical areas characterized by a significant imbalance between supply and demand for housing.
  • A 75% reduction is applicable on capital gains resulting from transfers of building lands, built real estates or rights relating to these same properties located for all or part of their surface area within the perimeters of major town planning operations set by the aforementioned act in the second paragraph of article L. 312-4 of the town planning code or operations of national interest.
  • These rates are increased to 85% when the transferee undertakes to ensure that the habitable surface area of the housing thus created is allocated upon completion, for at least 50% of the total surface area of the constructions to social housing subject to a real joint lease or intermediate housing.

These provisions apply to transfers made from January 1^st 2024.

III. Miscellaneous provisions

1. 1. Payment of services to companies established abroad

Reminder of the current system: “Amounts received by a natural or legal person domiciled or established outside France, as remuneration for services rendered by one or more persons domiciled or established in France, are taxable in France in the name of the latter:

• or, when they directly or indirectly control the person who receives the remuneration for the services;
• or, when they do not establish that this person primarily carries out an industrial or commercial activity, other than the provision of services;
• or, in any case, when the person who receives the remuneration for the services is domiciled or established in a foreign State or a territory located outside France where he is subject to a privileged tax regime within the meaning mentioned in CGI article 238 A.”

The law extends the scope of the system to remuneration paid for the commercial exploitation of rights attached to the image, name or voice of one or more people, the use of copyright or neighbouring rights, or industrial or commercial property or similar rights.

This text applies to income received from January 1^st 2024.

1. 2. Recording rights

Reporting obligations relating to transfers of corporate rights of legal entities with a preponderance of real estate: in order to avoid certain fraud, the law requires the addition of new information in acts and declarations relating to the transfer of interests in a legal entity predominantly in real estate.

1. 3. Local taxes

• Exemption from property tax and CFE for wind turbines: in order to remedy the differences in treatment observed between concrete masts and metal masts, this amendment specifies that the exemption applies to wind turbine masts, whatever their design.

• Exemption from property tax for homes that have undergone energy renovation: the conditions for benefiting from property tax exemptions on built properties are updated.
  
  The following conditions must be observed cumulatively:
  • the housing has been completed for more than ten years on January 1^st of the first year for which the exemption is applicable;
  • the total amount of expenses paid during the year preceding the first year of application of the exemption is greater than €10,000 per accommodation or the total amount of expenses paid during the three years preceding the first year of application of the exemption is greater than €15,000 per accommodation.
    
    The exemption applies for a period of three years starting from the year following that of payment of the total amount of expenses. It cannot be renewed during the ten years following the expiration of an exemption period.

• Exemption from property tax for new housing meeting energy performance criteria: municipalities and public intermunicipal cooperation establishments with their own tax system may, by deliberation, exempt from property tax, up to a rate of between 50% and 100% and for their share, the construction of new housing, meeting energy and environmental performance criteria.
  
  The exemption applies for a period of five years starting from the year following that of completion of the construction.
  
  The owner must attach to the construction declaration all elements justifying that the construction meets the required energy and environmental performance criteria.

This law also includes other measures that we have not detailed in this article. However, we would be delighted to talk to you about them, or to answer any questions you may have on the points we have covered in the article!