This year we are again presenting the most important provisions of the Finance Act in two parts:
- Personal taxation: presented in this article;
- Corporate taxation: which will be published in a future article at the end of February.
An important measure of this finance law, the introduction of withholding tax, has already been the subject of two articles, so we will not develop it here. Please, refer to these articles, here are the links:
I – Tax reductions & Tax credits
1 – Territorial enlargement of the “PINEL” scheme
This system consists of a tax reduction granted under certain conditions to investors in certain rental housing.
Eligible investments must be in areas where the rental offer is insufficient. The law adds, for investments made from 2019, the municipalities whose territory is covered by a “Contrat de Redynamisation de Sites de Défense” (CRSD) which means “Contract of Revitalization of Defense Sites”.
2 – Extension of the “PINEL” scheme to non-residents
For investments made from 2019, the benefit of the tax reduction will continue to apply to non-resident persons provided that they made the investment when they were French residents.
3 – Subscription to the capital of Small and Medium Enterprises (P.M.E.)
The increase in the rate of income tax reduction to 25% scheduled for 2019 is extended in 2019.
4 – Extension of tax credit for energy transition
The provisions of the Finance Act for 2018 are unchanged except for a few clarifications:
- Oil boilers are no longer allowed,
- Glass walls or glazed openings are only permitted if the new walls or openings are installed in place of a single glazing,
- A new expenditure is allowed from 2019, the removal of an oil tank, provided that the income of the taxpayer does not exceed a certain ceiling. The rate of the tax credit is 50%.
II – Agricultural taxation
1 – Creation of the « Déduction pour Epargne de Précaution » (DEP)
The deduction for precautionary savings (DEP) allows operators subject to a real tax system to deduct from their profit sums that can be used to the professional activity over the next 10 years.
This device comes in replacement of “Déduction Pour Investissements” (Deduction for investments) and “Déduction Pour Aléas” (Deduction for contingencies).
The amount of the deduction is capped and the farmer must also deposit in a bank account a sum of at least 50% of the amount deducted.
2 – Locking the value of low turnover stocks
Farmers who are subject to a real tax regime may choose to book their inventories at a value determined at the time of the locking option until the resale of those products (or animals).
This measure applies to fiscal years beginning on or after January 1st 2019.
3 – Contribution of a farm to a partnership or option for the corporation tax system
Measures to facilitate the change of tax system are intended to allow the spread over 5 years of the tax payable at the time of the change of tax system.
These measures are effective for fiscal years beginning on or after January 1st 2019.
III – Capital gains on securities
1 – Settle in France of service providers, partners or directors of investment companies incorporated in another European state
When these people move to France between July 11th 2018 and December 31st 2022, incomes from previous “carried interest” are taxed at the flat rate of 30%.
2 – Capital gains on digital assets
Capital gains on these assets (primarily electronic money) are calculated by making the difference between the sale price and the total acquisition price of all assets by the quotient of the sale price over the total value of the portfolio of values.
This capital gain is taxed at the flat rate of 30%.
3 – Amendments to the “exit tax”
Taxpayers who transfer their tax domicile outside France are taxed, in certain cases, on the unrealized capital gains of the securities they own. Changes are made to this plan as of January 1st 2019:
- A guarantee no longer has to be constituted if the taxpayer transfers his domicile to a country that has concluded an agreement with France,
- The retention period for securities is reduced to 2 years (or 5 years if the overall value exceeds € 2.57 Million,
- Reporting requirements are simplified.
IV – Treatments and salaries
1 – Severance benefits
The scope of total or partial exemptions from severance benefits received on or after January 1st 2019 is expanded.
2 – Exceptional bonuses paid before March 31st 2019
Premiums paid by an employer under the “emergency measures” are exempt from taxes and social contributions up to a limit of € 1000 per beneficiary.
3 – Exemption of extra time
Extra time and complementary time worked from January 1st 2019 are tax-free within the annual limit of € 5000.
V – Non-residents taxation
- Currently applied withholding tax on wages, pensions and annuities will be eliminated as of January 1st 2020. It will be replaced by a withholding tax non discharging calculated at the same rates as the withholding tax applied to residents.
- The minimum tax rate applicable to French-source income of non-residents increases to 30% for income exceeding the 2nd bracket of the income tax schedule from January 1st 2018.
- The time limit for the sale of a property exempt from tax on the capital gain by a person who goes abroad increases from 5 to 10 years.
- The capital gain on the sale of the main residence of expatriates is exempt from January 1st 2019, provided that the sale takes place before the end of the year following the year of departure.
- As of January 1, 2019, impatriates will be exempt from income tax on option:
- Either on the amount of the impatriation premium received,
- Or on 30% of the net remuneration.
VI – C.S.G. Amendment
This paragraph mainly concerns persons affiliated to another European social security system than the French regime.
We have already explained the provisions through our article entitled “Exemption from C.S.G. C.R.D.S. on heritage incomes and investment products for certain foreign persons”. Please, refer to this article, above is the link.
VII – Local taxes and recording rights
1 – Housing tax
Persons who have lost the benefit of the total exemption since 2015 or 2016 due to the elimination of the additional half share granted to widows, are exempt again for the year 2018.
2 – Amendment of “Dutreil Pacts”
We briefly recall that the “Dutreil Pacts” consist of agreements between donors and recipients of professional properties. These agreements make it possible to obtain a 75% reduction of the donation rights.
Several adjustments come into effect on these agreements to make them easier, They are relative to:
- The commitment to retain the values received by the recipient,
- The transfer, contribution or exchange of securities received for free,
- Simplification of the declarative obligations.
We have not been able to present here all the provisions of this finance law. In addition, the measures have not been presented in detail, but we are at your disposal to comment on them.
As a result, do not hesitate to contact us!
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