Finance act for 2022 – Main provisions concerning Personal taxation

The finance act for 2022 (law 2021-1900 of December 30, 2021) includes many measures concerning personal taxation and local taxes: we present the most important ones below.

This article has two chapters:

• Tax calculation measures;
• Measures concerning certain tax categories.

We will complete our presentation of this finance act through our next article in which we will outline the provisions concerning companies:

• Determination of tax results and corporation tax calculation;
• VAT;
• Various measures.

I – Tax calculation measures

1. Calculation of income tax

Scale:

As every year, the income brackets of the income tax scale, as well as the thresholds and ceilings associated with them, are reassessed. This year, the rate of increase is set at 1.4%.

Exceptional income and deferred income:

Here is the tax calculation method: the tax is first calculated by excluding the exceptional or deferred income, then the tax is calculated again by adding to the ordinary income a quarter of the exceptional or deferred income.

Then, the difference resulting from the two calculations is multiplied by 4 and added to the amount of tax relating to ordinary income only. It is this total that represents the amount of tax owed by the taxpayer.

The law now adds: “Net exceptional income (idem for deferred income) is understood to mean after deduction, where applicable, of the deficit observed in the same category of income, of the overall deficit or of the negative overall net income”.

Thus, a taxpayer will not be able to carry forward a deficit in N+1 even though his income in N was sufficient to absorb it. This measure makes it possible to prevent certain tax optimizations.

2. Tax credits and tax reductions

A. Property income, the “Cosse deduction” is transformed into a tax reduction

* Conditions of application of the reduction

• Rental terms:
  • The accommodation is rented out under an agreement (intermediate, social or very social rental) concluded between January 1^st 2022 and December 31^st 2024;
  • The accommodation is rented bare for use as the main residence for the duration of the agreement;
  • The rent and the resources of the tenant, assessed on the date of conclusion of the lease, do not exceed the ceilings set by decree;
  • The rental is not concluded with a member of the tax household, an ascendant or a descendant of the taxpayer or with a person already occupying the accommodation, except on the occasion of the renewal of the lease.

• Dwellings concerned: the tax reduction applies to dwellings for which the taxpayer demonstrates compliance with an overall energy performance level set by decree.

* Calculation of the tax reduction

• Basis of calculation: it is calculated on the amount of gross housing income. When the accommodation is the property of a company not subject to corporation tax, the taxpayer benefits from the tax reduction within the limit of the share of gross income corresponding to his rights on the accommodation concerned.
• Rate: it is set at:
  • 15% for accommodation assigned to intermediate rental under the intermediate rental agreement;
  • 35% for housing assigned to social rental under the social and very social agreement;
  • The rates are increased to 20% (intermediate rental), 40% (social rentals), 65% (very social rentals) when the accommodation is given under a management mandate or rented to an approved public or private body for rental (or its subletting) to persons “experiencing particular difficulties”.

* Coming into force

The tax reduction applies from the effective date of the agreement without being able to be earlier than January 1^st 2022, and for its entire duration.

B. Renewal of the following tax reductions

• Reduction for cash subscriptions to the capital of press companies. It is renewed for payments made until December 31, 2024;
• Tax reduction “Censi-Bouvard” (furnished rentals), extended until December 31st 2022;
• Tax reduction “Denormandie” (work to transform premises into housing), renewed until December 31^st 2023;
• Tax reduction of 75% for certain donations (“Coluche donations”), renewed until 2023, within the limit of a payment of 1000 euros;
• Tax reduction for donations to organizations fighting domestic violence, renewed until December 31^st 2022;
• Experimental device for the “Pinel” reduction in Brittany, this device is extended until 2024;
• First press subscription tax credit. This tax credit is renewed until 2023 but, from 2022, it will be means-tested. The amount of the reference income of the tax household must not exceed, for the penultimate year preceding that of the first subscription € 24,000 for one share of the family quotient. This ceiling is increased by 25% for each additional half-share.

C. Tax credit for services to persons

The law clarifies the scope of services eligible for the tax credit in order to strengthen legal certainty for the economic operators and taxpayers concerned.

* The following services are eligible for the tax credit if they are included in a set of services:

• Accompaniment of children below an age set by decree in their travels outside their homes;
• Service of driving the personal vehicle of the elderly, disabled or suffering from chronic pathologies from home to work, at the place of vacation, for administrative procedures;
• Accompaniment of the elderly, disabled or suffering from chronic pathologies, in their travels outside their homes;
• Home meal delivery;
• Collection and home delivery of ironed linen;
• Home shopping delivery;
• Remote assistance and video assistance.

* The services below qualify for the tax credit even if they are not included in a set of services when supplied to the taxpayer’s domicile:

• Home care of children under 3 years old;
• Assistance in the daily acts of life for the elderly and for people with disabilities or suffering from chronic pathologies who need such services at home;
• Home maintenance and housework;
• Minor gardening work, including clearing work;
• Small do-it-yourself work called “all-hands man”;
• Home school support;
• Beauty care at home for dependent people;
• Meal preparation at home, including time spent shopping;
• Home computer assistance;
• Pet care and walking, except veterinary care and grooming, for dependent persons;
• Maintenance, upkeep and temporary surveillance, at home, of the main and secondary    residence;
• Administrative assistance at home;
• Sign language interpreter, written technician and spoken language coder.

* Ceiling on expenses used to calculate the tax credit

The overall limit on the amount of expenses is set at €12,000 (increased by €1,500 per dependent child and for each member of the tax household aged over 65).

But certain categories of expenses are subject to a lower ceiling:

• The total amount of small DIY work called men all hands is capped at €500 per year and per tax household. The duration of a small do-it-yourself intervention cannot exceed two hours;
• The amount of IT and Internet assistance at home is capped at €3,000 per year and per tax household;
• The amount of interventions of small gardening work of individuals is capped at €5,000 per year and per tax household.

* Generalization of the real-time payment of aid in the context of services to persons

This concerns individual employers who use the Cesu platform then, from April 2022, individuals who use a service provider and, finally, beneficiaries of the APA and the PCH from the end of the first semester 2022.

The employer no longer pays his employee more than 50% of his remuneration, the tax benefit being deducted instantly by the Urssaf on the Cesu platform. Taxpayers who go through a service provider company will also pay only 50% of the price of the service, the other half was paid directly by the State to the companies.

These measures apply from the 2021 income tax.

II – Measures concerning certain tax categories

1. Salaries and wages

Temporary tax exemption for tips:

The sums of money voluntarily remitted during the years 2022 and 2023 by the customers for the service, directly to the employees or the employer (and then returned to the personnel) are exempt from tax and social security contributions.

This exemption only concerns wages not exceeding 1.6 SMIC.

Inflation allowance:

This is an exceptional and individual aid of €100 for the benefit of persons residing in France who receive an activity, replacement or social income less than or equal to 2,000 euros net per month, in order to enable them to in the face of the rise in prices observed at the end of 2021.

Three conditions are necessary to perceive it:

• Be at least sixteen years old (it concerns all young people in activity or enrolled in a training or support process towards professional integration);
• Reside in France;
• Have received, in October 2021, an activity, replacement or social income.

2. Capital gains on sale of digital assets

This concerns transfers of bitcoins, ether, dash, dogecoin, peercoin, namecoin, etc.

Taxation of professional earnings in BNC from January 1^st 2023:

The law gives a new definition of professional earnings. The products of the purchase, sale and exchange of digital assets carried out under conditions similar to those which characterize an activity carried out by a person engaged in a professional capacity in this type of operation are qualified as professional profits.

As of January 1^st 2023, gains from the sale of digital assets made by individuals but considered as professionals, will be taxed in the BNC category. On the other hand, professional gains made until December 31^st 2022 remain taxed in BIC.

Taxation of occasional gains at 12.8% with possible option for the scale from 2023:

Gains from the sale of digital assets made on an occasional basis by natural persons in the context of the management of their private assets are taxed at the flat rate of 12.8% plus social security contributions.

For transfers made from January 1^st 2023, taxpayers will be able to opt globally and expressly for the progressive scale of income tax.

3. Capital gains on securities

The General Tax Code provides that for the calculation of the taxable capital gain on the sale of securities, the acquisition price used is reduced by the tax reduction obtained under the IR-PME as well as the tax reduction for subscription to the capital of solidarity land companies.

The finance act provides that for the establishment of the taxable capital gain in the event of the sale of solidarity company shares, the acquisition price will no longer be reduced by the tax reduction actually obtained.

All the team of French Business Advice is at your disposal to support you, so do not hesitate to contact us!