November 06, 2017
2018 French President Emmanuel Macron’s Budget – Individual Tax
The substantial tax cut of the abolishment of the wealth tax on financial investment is meant to signal that Macron’s France is a much friendlier environment for business and to reinforce the attractiveness of France for foreign investors.
France’s National Assembly has approved President Emmanuel Macron’s budget proposal to limit the wealth tax exclusively to real estate and to set up a flat 30% tax rate on passive income and capital gains.
The 2018 budget definitively encourages financial investments versus the real estate.
1. Drastic reduction of tax on financial investments
The current wealth tax or ISF will be abolished as from January 1, 2018 on all financial assets including French and foreign life insurance policies.
A 30% flat tax rate will be set up on income deriving from all financial investments including interests, dividends, gains from life insurance policies and capital gains on sale of shares.
The 3% & 4% exceptional contributions will still apply for taxpayers with high income.
Capital gains on sale of shares / stocks
The 50% and 65% rebates for length of holdings will be cancelled except for sale of shares acquired before January 1, 2018, and only if the taxpayer elects for the progressive tax rates.
The 40% rebate on dividends will be cancelled except if the taxpayer elects for the progressive tax rates.
Gains deriving from Life insurance policy
The 30% rate will apply to all the gains deriving from investments made after September 27, 2017.
However, the favorable income tax rate of 7.50% granted to policies over than
8 years will still be applicable to investments policies which do not exceed €150,000 per person, or €300,000 for a joint policy.
For investments made before September 27, 2017, the payment of the tax under the « Prélèvement forfaitaire libératoire » to benefit for the income tax rates of 7.50% and 15% is still available.
Policies held for more than eight years will continue to benefit from the €4,600 allowance for single and €9,200 for married couples / PACS partners.
New – The existing system of payment of tax called « Prélèvement Forfaitaire non libératoire » due by French tax residents receiving FOREIGN source dividends and distribution will be extended to the gain of Assurance-Vie deriving from investments made after September 27, 2017. It will be required to file spontaneously a specific Form and pay the 30% flat tax rate by the 15th of the month following the withdrawal.