With the first wafts of warm spring weather, ease out the deck chair, open a cold beer, watch the breeze idly flicking through the budding daffodils at your feet ... and WAKE UP. It’s tax time ... again! Forms will hit the doormats in late April 2013 and the usual filing deadlines apply: end of May for paper declarations and up to mid-June for internet (depending on where you live). Contrary to what the French government may say, taxes have gone up. Obviously for the higher earners in excess of €150,000 per annum this was already out there, but there are all kinds of smaller measures that will affect everyone.
Overtime taxed: Hollande overturned the Sarkozy "travailler plus, gagner plus" measure. From August 1st 2012 overtime is taxed like normal salary.
Dividend tax: only 60% of dividend income is taxable, that hasn’t changed, but in addition there was a second abatement of €1525 for a single person, €3050 for a couple. Hollande has done away with this.
Capital gains tax (on investments): we already know that the base was increased in 2011 to 19% flat-rate plus 15.5% social charges (prélèvements sociaux), now gains will be taxed at 24% plus 15.5%, or 39.5%.
Personal allowance: the 10% personal allowance on salary will see the upper cap reduced from €14,157 to €12,000 per annum, so if you earn €130,000 your 10% personal allowance will be effectively capped at 9.23%.
Extra child: for each child you have the tax rate gets better, but the progressive gain per child previously capped at €2336 per child has been reduced to €2000/child.
CSG deductible: the funny line on the tax return where you can deduct part of your previous year’s CSG (social charges) from your taxable income. This drops from 5.8% to 5.1%.
Income tax on dividends and capital gains on investments: you’ve probably had the incomprehensible (!) letter from your bank sometime in late February and binned it as too complicated. Previously your bank interest and investment income could be taxed at source by the bank under the prélèvement libératoire system. This was a flat-rate tax of 24% and was of particular advantage to higher rate taxpayers. Now, the interest is to be added to your other income and will be taxed at your marginal rate of tax, not-withstanding the banks will still take an “advance” on the tax due amounting to 21% for dividend income and 24% for interest. The following year there will be a reconciliation and the higher rate taxpayers will pay the balance due. For a single person with less than €50,000 dividend income or less than €25,000 interest (or double these amounts for a couple) it is possible to request the old rate of 24% under the prélèvement libératoire/taxation at source. ask your bank.
Real estate capital gains tax: after all the bad news we already had last year (see previous issues), another little gem from the French tax office: all capital gains of more than €50,000 will be subject to an additional tax of between 2% and 6%, effectively, bringing a possible upper rate of capital gains tax of 25% (plus bien sûr social charges at 15.5%).
I bet that cold beer’s gone horribly warm now and it’s suddenly started pouring with rain!
Wake up. It’s tax time ... again!
- Peter Johnson