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France: Tax announcements, proposals of new French government
Tax proposals of France’s new government
The French prime minister last week presented to the French National Assembly the first tax measures expected to be implemented in the very near future. These measures would (in all likelihood) be included in the draft Finance Law for 2018, to be submitted to the French Parliament during the fall 2017. Many of the proposals would aim at increasing the competitiveness of the French marketplace.
Among the proposals are measures that would:
- Concerning the corporate income tax rate—no measures were announced, except for confirming a desire to continue with a planned future reduction until the rate is 25% (recall that a phased-in, progressive reduction of the ordinary income tax rate from 33.33% to 28% was approved last year, and President Macron has indicated that the ultimate goal is an ordinary rate of 25%, but no scheduled for this further rate reduction has been announced).
- Repeal the highest rate of the tax imposed on salaries and applied at the employer level for those employers that are not fully subject to the value added tax (VAT)—in particular, banks and financial institutions and insurance companies. This tax is assessed and imposed at progressive rates. The highest rate is 20% for the portion of yearly individual salaries exceeding €152,279. This top rate would be adjusted so that such portion of the salaries would be subject to a rate of 13.60% (which currently applies with respect to the portion of salaries between €15,417 and €152,279).
- Repeal the tax on financial institutions with intra-day market operations.
- Exclude certain bonuses from the computation of redundancy payments to be made to dismissed employees—a labor law measure, and not affecting contributions. This proposal would mean that such bonuses would be excluded from the basis on which redundancy payments (that are based on the past salaries and generally are equal to a certain number of past monthly salaries) are computed.
- Postpone by one year, application of the new PAYE system (compulsory contemporary tax withholding on salaries and other income) thus being effective 1 January 2019 (instead of 1 January 2018).
- Modify the wealth tax and the dwelling tax (taxe d’habitation that is paid due by taxpayers for the benefit of local councils)—the prime minister indicated that these reforms would start in 2019 only, but the president has now asked for the change to become effective beginning from 2018 (apparently the wealth tax reforms would be fully effective from 2018, and the reforms for the dwelling tax would be effective begin from 2018, but the effective date could be subject to change). The effective date provisions will be clarified when the draft Finance Law is made available in September 2017.
One other contemplated reform would be to transform the current CICE regime (a tax credit granted to employers on salaries paid up to a certain level) into a permanent reduction of social charges. It is not currently clear whether this change would be implemented in 2018 or in 2019 (its implementation would result during the year when it becomes applicable in a double public spending, one resulting from the use or reimbursement of the tax credit and the other from a reduction of the proceeds of the social bodies, thus increasing the public deficit which the French state has committed, in application of EU regulations, to limit to 3%).
For more information, contact a tax professional with Fidal* in France or with KPMG’s International Tax Team in the United States:
Gilles Galinier-Warrain | +33 1 55 68 16 54 | gilles.galinier-warrain@fidal.com
Olivier Ferrari | +33 1 55 68 18 14 | olivier.ferrari@fidal.com
Laurent Leclercq | +33 1 55 68 16 42 | laurent.leclercq@fidal.com
Bruno Bacrot | +33 1 46 24 30 30 | bruno.bacrot@fidal.com
Patrick Seroin | +1 (212) 954-2523 | patrickseroin@kpmg.com
* Fidal is a French law firm that is independent from KPMG and its member firms.
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. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.
