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