French taxation of income and capital gains

French taxation on income or capital gains varies according to their origin. Thus, a capital gain realised on a property does not suffer the same taxation as a capital gain realised on shares of he stock market. Similarly, distinctions are made for income from work depending on the activity. Here is a summary of the French taxation per category.

Treatments, salaries, pensions and annuities

This category affects salaries, pensions and annuities.

These income can claim a deduction for business expenses. The taxpayer has the choice between two options (he will choose the most advantageous one depending on the situation):
◦ He deducts from his net income of social contributions expenses actually incurred in connection with his business (on justification).
◦ He deducts 10% of its net income of social security contributions. This reduction is applicable in the limit of €12,000 for each member of the fiscal household (€3,660 per fiscal household for pensions and lifetime annuities received free of charge). If these 10% are less than €421 per member of the fiscal household (€374 for pensions and lifetime annuities received for free) the retained deduction is this minimum threshold (€421 or €374).

Industrial and Commercial profits (BIC in French)

Industrial and commercial profits (BIC) are the profits from an activity of commercial, industrial or artisanal nature
◦ For Profit
◦ Exercised in a regular and usual way
◦ Exercised by persons acting for their own account

These revenues are generated by operators of individual companies or by associates of partnerships to share the benefits accruing to them.

There are 3 modes of taxation of Industrial and Commercial profits:
The real regime (le régime réel): the taxable profit is equal to the net profit minus expenses.
The real simplified regime (le régime réel simplifié): resume the classical principle of the real regime, but with a simplified accounting.
The Micro-BIC regime (le régime micro-BIC): the taxable profit is equal to the gross annual revenue with an allowance of 71% with a minimum amount of €305 (this reduction is 50% for service activities) .

These regimes are available or not depending of turnover:

Commercial Activity Service Activity Applicable Regimes

Less than € 81,500

Less than € 32,600

Micro-BIC, Real simplified or  Real

Between €81,500 and €777,000

 Between €32,600 and €234,000

Simplified Real or Actual Real

More than € 777,000

 More than € 234,000

Real

The renting of furnished apartments is considered a service activity.

For non-members of accounting centers, a factor of 1.25 is applied to reported profits.

Non-commercial profits (BNC in French)

Non-commercial profits (BNC) are the revenues of non-commercial activities namely:
◦ Profits of liberal professions
◦ Profits of charges and offices
◦ Profits from any source of profit (copyright, industrial property, healer…).

These revenues can be generated by individual operators or by members of partnerships.

There are 2 types of taxation of « BNC »:
The regime of controlled declaration: the taxable profit is equal to net profit minus expenses.

The regime micro-BNC: the taxable profit is equal to the gross annual income with an allowance of 34%, with a minimum amount of €305.

These regimes are available or not depending of realised income :

Income Excluding Tax Applicable Regimes

Less than €32,600

 Micro-BNC or Controlled

More than €32,600

Controlled declarative

For non-members of accounting centers, a factor of 1.25 is applied to reported profits.

Agricultural profits

Agricultural profits correspond to agricultural activities (operating of rural properties, income from forestry production, profits from livestock…).

There are 3 taxation modes of « BIC »:
The real regime (régime réel): the taxable profit is equal to the net profit minus expenses.
The real simplified regime (régime réel simplifié): resume the classical principle of the real regime, but with a simplified accounting.
The flat-rate regime (régime forfaitaire): it varies depending on the region, on the activity and other individual elements of the farmer.

Under the real regime, young farmers (less than 60 months of activity) benefit from a favorable framework: a reduction of 50%. They may even receive a discount of 100% if they receive the grant for installation.

These plans are available or not depending of turnover:

Average income over 2 years Applicable Regimes

Up to €76,300

  Flat rate, real or real simplified

Between €76,300 and €350,000

Real or real simplified

Beyond €350,000

 Rea

For non-members of accounting centers, a factor of 1.25 is applied to reported earnings.

Income from movable assets

It’s compulsory to declare all income from financial investments (stocks, bonds, bank accounts…).

However, the following are exempt from tax:
◦ « A » account (Livret A)
◦ Youth account (Livret Jeune)
◦ Sustainable Development Account (Livret de Développement Durable)
◦ Housing Savings account and Housing Savings Plan less than 12 years old (Compte Epargne Logement et Plan Epargne Logement)
◦ Shares Savings Plan (Plan d’Epargne en Actions)
◦ Popular Savings Plan (Plan d’Epargne Populaire)
◦ Popular Retirement Savings Plan (Plan d’Epargne Retraite Populaire)

Fixed-income Investments: bonds, debentures, savings accounts, current accounts…

They are subject to the schedule of income tax.

They are subject to a withholding tax at source of 24%. This levy is an advance which will be deducted from the following year’s income tax.

Variable-income Investments: dividends on shares, interests and related products

They are liable to income tax after deduction of 40% and imputation of certain financial costs.

A tax levy at source of 21% is now mandatory. It is not a withholding tax, but an advance on income tax payment. The taxpayer declares the following year his total income, which will be taxed at the scale of income tax, which will be deducted from the tax of 21% already paid.

The advance exemption

Taxpayers whose income tax reference is less than €50,000 (€75,000 for a couple) may request an advance exemption from their bank.

Property income

It is necessary to declare all income from the rental of properties belonging to the different members of the household (apartments, land, shares of REITs… ) except for rented furnished apartments (which fall within the Industrial & Commercial Profits – « BIC »).

Taxpayers have the choice between two different regimes to declare their property income:

The real regime (le régime réel): the taxable property income is equal to the gross income received, minus deductible expenses (repair, maintenance, administrative and management charges, potential tax deductions, interests on loans, insurances, work…).
The « microfoncier » regime (le régime microfoncier): it is available to taxpayers with annual property income below €15,000. The latter benefits from an allowance of 30%. This regime isn’t applicable to income from investments offering a tax benefit.
Capital gains of individuals

It’s compulsory to report all capital gains realised by the different members of the fiscal household on:
◦ The transfer of immovable and movable assets
◦ The sale of securities (stocks and bonds) and social rights

Capital gain on real estate

The real estate gains are those realised on the sale of real estate.

There are allowances granted depending on the holding period:
◦ 6% per year of ownership between the 5th and the 21st year
◦ 4% for the 22nd year

From the 22nd year, the exemption from income tax will be total (the total exemption from social security contributions is reached after 30 years).

Between September 1st 2013 and August 31st 2014, an additional reduction of 25% is applied in addition to the allowance for holding period.

Real estate capital gains are taxed at 19%.

There is an additional fee for gains greater than €50,000.

Capital gains on securities

These capital gains are taxed at progressive rates of income tax after deductions for any holding period.

The Finance Act 2014 provides for an amendment to the allowances granted depending on the holding period:

General Plus* Tax Allowance

2-8 years

1-4 years

50 %

Over 8 years

4-8 years

65 %

Over 8 years

85 %

* It regards only the Small & Medium Business created for less than 10 years at the date of securities acquisition

For your savings, ask the help of a specialist!

Fill the form below to be put in touch with a wealth manager nearest to you. Our legal and finance experts will answer your questions without obligation.

GET ANSWERS NOW !

Use the form below to ask any questions to our Financial Consultants.