FINANCE ACT FOR 2015

The Finance Act for 2015 was adopted by the French Parliament on December 18th 2014 and was published in the French Official Journal on December 30th 2014.

Individual Income Tax

Scale

  • The first individual tax bracket applying a rate of 5.5% to the part of taxable incomes between €6011 and €11,991 is removed. The entry threshold into the second individual tax bracket applying a rate of 14% is lowered from €11,991 to €9,690. Taxpayer incomes per unit, not exceeding €9,690, are exempt from income tax for income in the 2014 taxation year. Other limits of the individual income tax brackets are revaluated by 0.5%.
  • The discount limit is increased from €1,016 to €1,135 for single, divorced, separated and widowed individuals and to €1,180 for jointly taxed married couples or persons in civil union. The new discount limit corresponds to the difference between the upper limit (€1,135 or €1,180) and the amount of tax.

Family quotient

  • All upper limits to the effects of family quotient are increased to 0.5% for 2014 incomes. The maximum advantage resulting from application of the family quotient is set at €1,508 per additional half-unit and at €754 per additional quarter-unit. For single parents raising children alone, the tax advantage resulting from the unit corresponding to the first dependent child is limited to €3,558.

Tax reductions and tax credits

Pinel scheme for rental investment

  • For buildings and subscriptions realised since September 1st 2014, investors can choose between a minimum lease commitment of 6 or 9 years to benefit from tax reduction and this may be extended up to a maximum of 12 years. The rate of tax reduction varies according to terms of lease commitment and can reach a maximum rate of 21%. Leasing to an ascendant or a descendent is permitted without losing tax reduction for investments realised since January 1st 2015.

Tax credit for energy transition

  • The list of eligible expenses for tax credit includes new costs and the tax credit rate is increased from 15% to 30% for expenses which have been incurred since September 1st 2014.

Real estate gains

  • The law legalises administrative instruction relating to gains on the sale of building lands. For sales realised since September 1st 2014, calculation of gain on the sale of building lands is in line with that of gain on the sale of buildings relating to tax income and social taxes. The law provides a 30% tax rebate to determine the tax base (tax income and social taxes) of gains on the sales of building lands.

Registration

Temporary exemption from free transfer rights for certain donations

  • Subject to respect of certain criteria, donations of building lands and new buildings are subject to a temporary exemption from free transfer rights for donations established in a notarial act from January 1st to December 31st 2015. The amount of exemption depends on the family relationship between the donor and the donee.

Partial exemption from free transfer rights for certain buildings

  • Partial exemption from free rights is created in favour of the first transfer of buildings and property rights for which title deeds were restored by an act properly published from October 1st 2014 to December 31st 2017.

AMENDING FINANCE ACT FOR 2014

The Amending Finance law for 2014 was published in the French Official Journal on December 30th 2014.

By way of decision n°2014-708 DC of 29th December, 2014, the Constitutional Council (Conseil Constitutionnel) censured several provisions of the law.

Repurchase of shares

  • From January 1st 2015, the payment of shareholders when they repurchase their shares from individual shareholders or legal entity shareholders is taxed solely under the tax regime of capital gains from sale of shares. This measure follows the decision by the French Constitutional Council censuring difference of treatment between incomes received by individual shareholders when they repurchase their shares from the issuing company.

Capital gains

  • The scope of deduction for duration of ownership is clarified. Net gains from repurchase of shares are eligible for deduction for duration of ownership  and net gains are excluded where realized since opening of a French action plan (PEA) or PEA “PME-ETI”, in the event of of closure before 5 years or after 5 years when the closure shows a loss.

Madelin” and “ISF-PME” tax reduction

  • The benefit from “Madelin” and “ISF-PME” tax reduction is more flexible in the event of subscription to the share capital of a pure holding company by removing conditions relating to minimum number of employees and to maximum number of 50 representatives or shareholders, for subscriptions realized since January 1st 2015.

Non-resident individuals

Real estate gains

  • From January 1st 2015, the tax regime relating to real estate gains realised by non-resident individuals (outside or not the EU and the EEA) is in line with the rate of 19% applicable to French residents.

Family quotient

  • The rule of the upper limit placed on the effects of family quotient is extended to non-resident individuals for income of the 2014 taxation year.

Tax representation

  • From 2015, the requirement of appointing a representative is removed for taxpayers located in a Member State of the EU or a State that is party to the Agreement on the European Economic Area having concluded a convention on administrative assistance for the purposes of combating tax avoidance and tax evasion and a convention on mutual assistance as regards tax recovery (Norway and Iceland).