France – 2015 Budget Law Contains Some Changes, for Individuals, Employers

France – 2015 Budget Law Contains Some Changes...

France’s 2015 finance law and 2014 amended finance law, enacted at the end of December 2014, introduced some minor changes to France’s personal tax system, including measures related to tax rates and thresholds, the “quotient familial,” and capital gains tax treatment of real estate dispositions by non-French-resident taxpayers, amongst others.

Related content

France’s 2015 finance law and 2014 amended finance law, enacted at the end of December 2014, introduced some minor changes to France’s personal tax system, including measures related to tax rates and thresholds, the “quotient familial,” and capital gains tax treatment of real estate dispositions by non-French-resident taxpayers, amongst others. 

This newsletter highlights the changes affecting employees – including those on international assignment – and their employers further to the enactment of the French Finance Law for 2015 at the end of December 2014 (French Finance Law for 2015 and the French Amended Finance Law for 2014)1.

Unless otherwise indicated, these measures took effect on 1 January 2015.

WHY THIS MATTERS

In contrast to previous years, the new laws include only limited changes to the tax system; recent budgets had seen tax reforms imposing higher taxes for most assignees and employees.

Despite the removal of the basic-rate income tax band (5.5 percent) and a lower starting rate for the 14-percent rate (€9,691, in contrast to last year’s €11,992) the increases in exemption amounts, personal tax allowances and credits, the adjustment to the personal tax brackets – though offset by limitations for some taxpayers in the ‟quotient familial” – mean basically little to no change in the tax burdens for taxpayers and no significant changes in international assignment costs. 

However, international assignment cost projections and budgeting for assignments to France, and for assignees outside France still subject to French taxation, should reflect these changes.

(For coverage of last year’s budget, see Flash International Executive Alert 2013-135, 3 October 2013.) 

Tax Thresholds

The main change this year is the removal of the 5.5-percent income tax band (net taxable income ranging from €6,011 to €11,991).  The other income tax thresholds are increased by 0.5 percent to keep in line with inflation.

The 2014 (on 2013 income) and 2015 (on 2014 income) tax brackets and rates are as shown on the next page.

2014 Tax Brackets

(on 2013 income)

Net taxable income (one unit)

Rate

2015 Tax Brackets

(on 2014 income)

Net taxable income (one unit)

Rate

Up to €6,011

0 %

Up to €9,690

0 %

€6,012 to €11,991

5.5 %

 

 

€11,992 to €26,631

14 %

€9,691 to €26,764

14 %

€26,632 to €71,397

30 %

€27,765 to €71,754

30 %

€71,398 to €151,200

41 %

€71,755 to €151,956

41 %

From €151,201

45 %

From €151,956

45 %

 

One small further change is that the décote (the income tax credit where tax liability is below a certain level) will increase from €1,016 to €1,135 for a single person and from €1,016 to €1,870 for a couple.

The contribution on high income (3 percent or 4 percent) remains unchanged.

Limitation of the Personal Allowance “Quotient Familial” Threshold for Nonresident Taxpayers

The amount of French income tax is based on the number of dependents in the household (known as the “quotient familial” system).  From 2015, 2014 nonresident taxable income will not benefit from the full dependents' allowance.  The additional half unit of the dependents’ allowance will be capped at €1,508, and €754 for each additional unit. 

As nonresidents are already taxed at a minimum 20-percent flat-rate tax, this measure will likely lead to higher taxation.

Real Estate Capital Gains by Non-French-Resident Taxpayers

The rate of capital gains tax on real estate transactions depended on the state of residence of the seller.  The French basic rate of 33-1/3 percent was reduced to 19 percent when the seller was tax resident in a country of the European Union (EU) /European Economic Area (EEA), and 75 percent if resident in one of the Non-Cooperative States or Territories (NCST). 

From 1 January 2015, the rate will be 19 percent irrespective of residence (except for NCST).

(For prior coverage of changes to the real estate capital gains taxation regime, see Flash International Executive Alert 2012-180, 5 October 2012.)

Increased Dwelling Tax Rate

An increased dwelling tax rate within a limit of 20 percent is now applicable to furnished housing not used as a principal residence in those cities where housing is in short supply2.

Obligation to Appoint a French Tax Representative No Longer Required

The Finance Law does away with the obligation to appoint a French tax representative, in particular for real estate transactions, where the taxpayer is a resident in an EU/EEA country.

FOOTNOTES

1 For the 2015 budget legislation, see Loi n° 2014-1654 du 29 décembre 2014 de finances pour 2015, (in French) at: http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000029988857&dateTexte=&categorieLien=id or http://www.assemblee-nationale.fr/14/projets/pl2234.asp or http://www.vie-publique.fr/actualite/panorama/texte-discussion/projet-loi-finances-pour-2015.html.

And for the amended finance law for 2014, see Loi n° 2014-1655 du 29 décembre 2014 de finances rectificative pour 2014 published in the Journal Officiel of 30 December 2014, (in French) at: http://www.assemblee-nationale.fr/14/dossiers/deuxieme_collectif_budgetaire_2014.asp or http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000029990432&dateTexte=&categorieLien=id.

2 For a list of the cities eligible for the new 20-percent tax, see: http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000027399823&dateTexte=&categorieLien=id.

CONTACTS

For further information or assistance, please contact your local KPMG International member firm GMS or People Services professional or the following GMS professionals with FIDAL Direction Internationale at tel. +33 (0) 1 55 68 43 07:

 

Alain Loehr, Partner

Ann Atchadé, Partner

Marie Lynn Simmons, Partner

Estelle Cupillard, Director

Gérôme Gbaya, Director

Cyril Klajer, Director

Nathalie Ferrari, Senior Manager

Stéphanie Giraudet, Senior Manager

Flash Alert

Flash Alert reports on developments that affect organizations with global mobility programs.

 
Flash Alert Home
 
View All France Flash Alerts

The information contained in this newsletter was submitted by FIDAL Direction Internationale in France. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

The following information is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

© 2016 KPMG SA, a French limited liability company (SA) and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform