Pension and Tax Reforms in France

By Bill Blevins, Managing Director, Blevins Franks

After much speculation, the French government finally announced its proposals to reform the state pension system on 16^th June. Its aim is to balance the pension books by 2018.  As expected, the proposals include an increase to the retirement age, with Labour Minister, Eric Woerth warning:  “Working longer is inevitable.  There is no magic solution”.

To help the government achieve its goal, it also announced plans to increase tax on higher earners as well as on investment income.  Once these are approved they will come into effect from next year and are expected to raise €3.7 billion in extra revenue.

The final text of the pension’s bill will go to parliament in September.

Pension age to increase - Starting from 1^st July 2011 the legal retirement age is to increase progressively from 60 years to 62 years by 2018.  It will rise by four months for each year. This is the age at which an individual has the right to receive his pension, which may or may not be a full pension, depending on whether he has made all the required contributions. The age at which an individual is entitled to receive a full pension will also be increased, from 65 to 67 years.  The government is also considering increasing the contribution period to 41.5 years by 2020. 

Income tax - The top rate of income tax, which applies to income in excess of €69,783, will rise from 40% to 41%.   

Capital gains tax - Tax on capital gains will also increase by 1%.  The rate for property gains therefore increases from 16% to 17% and for financial assets such as shares and securities increases from 18% to 19%.  At the same time the capital gains tax exemption for share gains (where no tax is charged if the sales proceeds are under €25,830 a year) will be abolished.   

Fixed rate on income from capital - Likewise, the fixed tax rate charged on dividends, bank interest and other investment income will rise from 18% to 19%.  Taxpayers have a choice of paying this fixed rate or the normal income tax scale rates, depending on what is more favourable for them.   

Other tax rises - The tax credit of €115 per person on dividends will be abolished.  Social security contributions on stock option gains will be increased, both for the employer (from 10% to 14%) and for the employee (from 2.5% to 8%). 

Bouclier Fiscal - Since 2007, French residents were shielded from paying more than 50% of their total income in income tax, wealth tax, social changes and local property taxes on the main residence combined.  These new tax increases will however fall outside the Bouclier Fiscal.  It is not yet clear how this will work in practice but France’s wealthiest taxpayers can expect to have a higher tax bill next year. 

Tax planning - These tax changes are a reminder of the importance of tax planning, to prevent yourself from paying more tax than you absolutely have to.  The assurance vie is still a very attractive option, since no announcement has been made to increase the fixed rates applying to these investments.  With an assurance vie, the fund rolls up tax free - tax is only payable when a withdrawal is made – and only the growth element of the withdrawal is taxed.  You have the option to elect for the fixed rates of tax, which reduce the longer the investment has been held, or for the scale rates to apply, depending on which results in the lowest tax bill.  The arrangement can also be an effective means of avoiding French succession tax and law.

The tax treatments detailed above are current at the time of writing; these are based on our understanding of current French legislation and taxation practice, and may change in the future.

For more advice on tax planning in France contact your local Blevins Franks Partner,                 

              Mary Taylor: on Tel: 0562 305140   mary.taylor@blevinsfranks.com

Small speeding

1 point and 68 euros or 135 euros less than 19 km / h

Large excess

3 points and 135 euros between 20 and 39 km / h .
4 points and 135 euros between 40 and 49 km / h .
6 points to 1500 euros max between 50 km / h and more

Belt

3 points and 135 euros

Phone

2 points and 135 euros

Parking

3 points and 135 euros

Excess

2 points if you speed or refuse to keep right when you're about to be exceeded

3 points and 135 euros when you overtake on the right or without flashing too close to a pedestrian ( or cyclist . ... ) or not possible to fall back quickly or by a tail of fish you 're already on the to be accelerated.

Fire Red or " STOP "

4 points and 135 euros

BAC

Little alcohol

Big Alcohol

6 points of motion , up to 9000 euros
135 euros: Rates of alcohol between 0.5 and 0.8g / l of blood is 0.25 to 0.40 milligram per liter of air exhaled .
up to 4500 euros . Flow also punishable by two years in prison max, for a blood alcohol of at least 0.8 grams per liter of blood is 0.4 milligrams per liter of breath.
- The penalty is the same in a state of obvious intoxication or if you refuse to submit to testing.
- In case of recidivism (state , state of obvious intoxication or refusal of the new test) , the maximum punishment is doubled ( up to 9000 euros and four years in prison ) .

Priority

4 points and 135 euros

Without blinking

3 points and 35 euros , if you change direction or if you leave a parking space

Lighting

3 points and 35 euros , if you change direction or if you leave a parking space

Safety distance

3 points and 135 euros

Single Line

1 points and 135 euros , if you ride .. 3 points and 135 euros: If you cross it .

No Entry

4 points and 135 euros

Highway

3 points and 35 euros when you are driving on the emergency lane 4 points to 135 euros, if you make a U - turn or perform reverse.

Radar Detector

2 points , to 1,500 euro

The Crimes

6 points , to 30,000 euros and 5 years in prison

Driving while license suspended or refuse to deliver

up to 4500 euros and two years imprisonment.

Plates

Up to 3,750 euros and 5 years in prison when they are false

Leak

After an accident or a refusal to obey , to 30,000 euros and two years in prison

Involuntary Injuries

with temporary interruption of work of less than three months : up to 30,000 euros and two years in prison.