France - The Finance Act Project for 2014 has been released by the French government on 25 September and will be debated by the French Parliament as from 15 October.

Creation of an exceptional solidarity tax on high remuneration paid by entities (Article 9 of the Finance Act Project)

Businesses operating in France, paying in 2013 or 2014 individual remuneration (wages and similar income, attendance fees, participation, stock options ...) or paying compensation to other entities paying those remunerations, would be liable to an exceptional tax at the rate of 50%, on the portion of the individual compensation exceeding € 1 million. The annual exceptional solidarity would be capped to 5% of the turnover of the year.

Capital gains derived from the sale of securities (Article 11 of the Finance Act Project)

Individuals who sell movable assets are subject to French income tax at progressive rates on the capital gains realized upon the sale, after a rebate for length of holding which would amount to:

  • 50% for holding between 2 and 8 years;
  • 65% after 8 years of holding.

This rebate would also be applicable to the sale of shares of collective investment in transferable securities ("OPCVM") provided the latter respects an investment quota in shares at least equal to 75%.

A specific regime would apply to capital gains derived from the sale of shares in small and medium companies ("PME") created less than 10 years ago under certain conditions, as well as holding animating groups of such kind of companies:

  • 50% for holding between 1 and 4 years;
  • 65% for holding between 4 and 8 years;
  • 85% after 8 years of holding.

The tax regime applicable to retiring executives should be abolished as from 2014. However, retiring executives may be entitled to benefit of a fixed rebate of € 500,000 (instead of the specific rebate for length of holding above-mentioned).

Deductibility of mortgage interest: anti-abuse provisions (Article 14 of the Finance Act Project)

For financial years ending on or after 25 September 2013, a company would be entitled to deduct the interest paid with respect to a loan granted by a related company only if the debtor proves that the interest would be subject to a corporate income tax at least equal to 25% to one which would have been determined under common law.

If the lending company is resident or established abroad, the corporate income tax determined under the conditions of ordinary law refers to the corporate income tax which would have been due in France if it had been established.

International reorganization: transfer of risks and functions (Article 15 of the Finance Act Project)

The Finance Act Project would amend the transfer pricing rules. In cases of international reorganization involving the transfer of risks or functions to a related party (or located in a Non-Cooperative State or Territory or in a privileged tax regime), and if the EBITDA of the transferor's company decrease of at least 20% of the average of the EBITDAs accounted for during the three financial years preceding the transfer, the transferor's company would have to demonstrate "that it received a financial compensation or indemnification equivalent to what it would have received from unelated parties in similar circumstances".