Following our article presenting the measures in the 2025 Finance Act concerning companies, we set out below the main measures impacting individuals.
The two main measures to note this year are the introduction of a differential contribution on high incomes and the exemption from registration fees for certain cash donations.
This presentation has three chapters:
- Tax Calculation Measures
- Measures concerning certain tax categories
- Miscellaneous provisions
This law also includes a number of measures that do not seem sufficiently relevant to us to be explained here, but we are obviously at your disposal to provide you with more details on your request.
I – Tax calculation measures
1 – Indexation of the tax brackets
All income brackets in the income tax scale, as well as their associated thresholds and limits, are increased in the same proportion as the change in the consumer price index excluding tobacco (i.e., 1.8%).
2 – Differential contribution on high incomes (CDHR)
This contribution aims to ensure a minimum tax rate of 20% of the highest income.
- Tax households concerned:
The contribution applies to taxpayers:- domiciled in France
- whose tax household income exceeds €250,000 for single, widowed, separated, or divorced taxpayers and €500,000 for taxpayers subject to joint taxation.
- Calculation of income:
The basis for calculating the contribution is the Reference Tax Income (RFR).
The RFR is reduced primarily by the following amounts:- the amount of the €500,000 tax reduction on capital gains from the sale of securities upon retirement;
- dividends for which the option to apply the scale was exercised and benefit from the 40% tax reduction;
- the amount of capital gains subject to tax deferral;
- the amount of capital gains and distributions subject to the levy provided for in Article 244 bis B (capital gains realized by persons not domiciled in France);
- the amount of exempt profits pursuant to exemptions related to regional planning policy;
- income and revenues benefiting from the expatriate regime;
- net income from the granting of operating licenses, taxed at a rate of 10%;
- income received by inventors upon the assignment or granting of the invention, subject to a rate of 10%;
- capital gains from contributions to a company subject to corporate tax for which the tax deferral expires;
- income and revenues exempt under an international double taxation convention.
Note: Exceptional income is only withheld for a quarter of its amount when, by its nature, it is not likely to be collected annually and the amount exceeds the average net income on which the taxpayer was subject to income tax for the last three years.
Conversely, income tax relating to exceptional income is withheld for a quarter of its amount.
- Calculation of the contribution:
It is equal to the difference between:- the amount resulting from the application of a 20% rate to the income defined above;
- and the amount resulting from the sum of income tax plus the amount of tax reductions and credits, the exceptional contribution on high incomes, and withholding taxes.
Taking into account family responsibilities and the marital status of taxpayers: To calculate the amount of CDHR due, the second part of the difference is increased by:- €1,500 per dependent;
- €12,500 for taxpayers subject to joint taxation.
To mitigate the threshold effect, a tax allowance is applicable when the reference taxable income is between:
- €250,000 and €330,000 for single, widowed, separated, or divorced taxpayers;
- €500,000 and €660,000 for taxpayers subject to joint taxation.
The tax allowance is equal to the difference, if positive, between the differential tax before the tax allowance and 82.5% of the difference between this income and €250,000 or €500,000, depending on the applicable threshold.
- Application period:
The contribution is due for income tax purposes for the year 2025.
It gives rise to the payment of an advance payment between December 1st 2025 and December 15th 2025 equal to 95% of the amount of the contribution estimated by the taxpayer.
3 – Tax reductions
Various reduction schemes are extended:
- loc’Avantages, extended until 2027;
- income tax reduction for subscriptions to the capital of press companies, extended until 2027.
Other devices are created or modified:
- Associations fighting domestic violence: Donations to these associations will qualify for a tax credit for donations to public interest organizations at an increased rate of 75%.
Effective date: February 15th 2025;
- Protection of religious heritage: Donations to finance conservation and restoration work on religious buildings in municipalities with fewer than 10,000 inhabitants in mainland France and fewer than 20,000 overseas benefit from a tax reduction rate increased from 66% to 75% for donations made between September 15th 2023 and December 31st 2025 to the Heritage Foundation;
- Subscription to SME capital – The law introduced two changes:
- increase in the tax reduction rate for cash subscriptions to innovation mutual fund units. The rate has been raised from 18% to 25%;
- Removal of the income tax reduction for local investment funds (FIP) in mainland France. The system is still in force for contributions made to FIPs located in Corsica and overseas.
II – Measures concerning certain tax categories
1 – Income from movable capital
The tax regime for company founder share subscription warrants (BSPCE) is modified. We do not explain the complex principles of taxation here, but we are available to answer any questions you may have on this subject.
2 – Capital gains for individuals
The €500,000 deduction for retiring executives, which was due to expire on December 31st 2024, has been extended until December 31st 2031.
3 – Salaries and wages
Clarifications provided by case law on “Management packages”: From now on, the tax authorities will be able to reclassify earnings resulting from “management packages” purchased by executives as salaries and wages when the benefit is in return for the duties performed within the company.
This system is applicable to transfers made from February 15th 2025.
III – Miscellaneous provisions
1 – Registration fees
Gifts of money: Gifts made in full ownership to a child, grandchild, great-grandchild, or, failing such descendants, a nephew or niece, are exempt from gift tax up to a maximum of €100,000 from the same donor to the same recipient and €300,000 per recipient if these sums are allocated by the latter (no later than the last day of the sixth month following the transfer):
- To the acquisition or construction of their primary residence;
- To work and expenses eligible for the energy renovation grant for the home they own and use as their primary residence.
In the case of rental, the lease contract cannot be concluded with a member of the donatory’s tax household.
Duration of application: This system applies to sums paid between February 15th 2025 and December 31st 2026.
2 – Accounts held abroad
Assets in an account held abroad or in a capitalization contract or similar investment taken out abroad, “as well as digital assets in a digital asset portfolio, within the meaning of Article 1649 bis C” (this reference has just been added to Article 755 of the General Tax Code), and whose origin and terms of acquisition have not been justified under the procedure provided for in Article L. 23 C of the Book of Tax Procedures, are deemed, until proven otherwise, to constitute assets acquired free of charge subject to free transfer tax at the highest rate provided for by law.
All the team of French Business Advice is at your disposal, so do not hesitate to contact us!
