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It is the time of year when we find out what tax changes we will charged in the following year and wait for parliament to debate and finalise the proposed budget. President Macron’s government has announced €9 billion worth of tax cuts for families in France. France’s draft budget for 2020 was revealed at the end of September. The bill has begun its progress through parliament, who will take a final vote on it late in December. Here is a summary of French taxation in 2020, based on the budget, but of course there could be amendments by the end of December.

Reduced tax rate for lower income in France

The main change is a reduction in the income tax rates for calendar year 2020. Since all income tax used to be paid in arrears, under the old system the tax rates announced in the 2020 budget would been for 2019 income (tax paid in 2020). However, now – with introduction of PAYE – the 2020 budget includes the income tax bands and rates for both 2019 and 2020.

French tax rates for 2019 income 

Tax rates remain the same as last year, but bands have been indexed for inflation:

Income Tax rate
Up to €9,964 Nil
€9,964 to €27,794 14%
€27,794 to €74,517 30%
€74,517 to €157,806 41%
Over €157,806 45%

 

French tax rates for 2020 income 

The starting tax rate is reduced from 14% to 11%: This will save taxpayers in this bracket around €350 per year. On the other hand, the 30% rate now starts at €25,405 instead of €27,794. 

Income Tax rate
Up to €9,964 Nil
€9,964 to €25,405 11%
€25,405 to €72,643 30%
€72,643 to €156,244 41%
Over €156,244 45%

 

Other tax changes are below……………… 

Flat tax on investment income in France 

The tax rate for investment income remains unchanged at 30% (inc. social charges) for 2020 income. 

French social charges 

No changes were announced for social charges, so it looks like they will remain as:

  • 9.7% for employment/self-employment income
  • 9.1% for pension income
  • 17.2% for investment income including rental income.

Tax on Assurance-Vies in France 

The initial budget draft did not include any reforms for the taxation of an Assurance Vie. Four early amendments which would have introduced significant changes were proposed but then rejected. The fourth was debated but it looks like it was also rejected, so hopefully we will not see any changes to Assurance-Vies in 2020.

Real Estate Wealth tax and Succession Tax in France 

The current threshold of €1,300,000 for the ‘IFI’ real estate wealth tax will stay in place for 2020, with no changes to the scale rates of tax. The 75% limitation also remains unchanged.

The budget did not include any reforms for Succession Tax rates and allowances.

Taxe d’habitation 

The changes to this local residence tax, announced in 2017, continue to remove households from Taxe d’habitation. While some already escape this tax, the number increases so that next year only 20% will have to pay it and by 2023 it will be completely abolished.

Corporation tax in France 

The main rate of corporation tax remains at 31%, but it is reduced to 28% for companies with turnovers under €250 million.

The information on this page is intended only as an introduction only and is not designed to offer solutions or advice. Beacon Global Wealth Management can accept no responsibility whatsoever for losses incurred by acting on the information on this page.