Finance Law for 2016 and Amending Finance Law for 2015 Taxation of individuals

07 January 2016

Laurence Clot, Nicolas Bourdon, Antoine Chalal

FINANCE LAW FOR 2016

The Finance Act for 2016 was adopted by the French Parliament on December 17th, 2015 and was published in the French Official Journal on December 30th, 2015.

By way of decision n°2015-725 DC of December 29th, 2015, the Constitutional Council censured the provision related to introduction of a progressive CSG on low salaries.

Individual Income Tax

Scale

  • The entry threshold into the first individual tax bracket applying a rate of 14% is raised to €9,700. Taxpayer’ incomes per unit, not exceeding €9,700, are exempt from income tax for income in the 2015 taxation year. The other individual income tax bracket limits are revaluated by 0.1%.
  • The discount limit is increased from €1,135 to €1,553 for single, divorced, separated and widowed individuals and to €2,560 for married couples or persons in civil union who are jointly taxed.

Family quotient

  • The upper limits of the effects of the family quotient are increased by 0.1% for 2015 incomes. The maximum advantage resulting from application of family quotient is set at €1,510 per additional half-unit. For single parents raising children alone, the tax advantage resulting from the unit corresponding to the first dependent child is limited to €3,562.

Implementation of the withholding taxation and modernization of the income tax 

  • The French Government has committed to undertake implementation of withholding of income tax by January 1st, 2018.  
  • Online tax return will be progressively mandatory from 2016 to 2019. To date, only taxpayers for whom the taxable income is above €40,000 will be obliged to do so. This threshold will be gradually lowered until 2018.
  • Thresholds above which dematerialized payment is mandatory are lowered. Currently, if the amount of tax (income tax and its instalments, housing tax, the public service broadcasting contribution, land taxes, etc.) to be paid is above €10,000, dematerialized payment is mandatory. This threshold will be lowered until 2019. Use of another method of payment will be sanctioned by a fine of 0.2%, of a minimum amount of €15.
Income tax exemption

Forced termination of corporate officers duties

  • In the event of forced termination of an executive officer’s duties (or, in general, of any officer of a company), the exemption of income tax on the indemnity received is now limited to three times the annual threshold of the social security cap, i.e. €114,120 for 2015 and €115,848 for 2016.
Tax credit

Tax credit for energy transition

  • The tax credit for energy transition allows a 30% credit on expenses undertaken for the acquisition of specific equipment. The benefit of this tax credit is extended until December 31st, 2016. An anti-abuse provision has been integrated into the law in order to limit the deductible amount for mixed equipment, combining eligible and non-eligible equipment.



AMENDING FINANCE LAW FOR 2015

The Amending Finance law for 2015 was adopted by the French Parliament on December 17th, 2015 and was published in the French Official Journal on December 30th, 2015.

Compliance with European rules on State aid of the wealth tax reduction for investment in SMEs
  • The wealth tax reduction granted for investments in SMEs is now compliant with the EU rules on State aids applicable to equity investments

Young and innovative companies

  • Henceforth, investments made in SMEs created within less than seven years and that cannot be considered as in difficulty are eligible to the tax reduction. 
  • Exceptions are provided, especially for companies of more than seven years if the investment:
    • finances integration of a new market and if it is higher than 50% of the annual turnover of the last 5 years;
    • if the subscription is qualified as a "follow on investment" made under specific conditions;
    • if the investment is made into the equity of a social utility company.

Limitation of the scope of investments

  • As was already the case, securities received in return for investments must not be listed on a stock exchange market.  
  • Investments realised by the contribution of an asset necessary to the realisation of the activity are no longer eligible.  
  • Activities of real estate construction for resale or lending are now excluded.

Limitation of the total amount received by the company

  • According to EU Commission regulation (June 17th, 2014, n°651/2014), the company may not receive more than €15 million.
'Madelin' income tax reduction
  • Some investments in SMEs may open up entitlement to a tax allowance of 18% of the sums invested, limited to an investment of €50,000 per year (or €100,000 for a couple). Conditions to benefit from the "Madelin" income tax reduction for investments in SMEs’ equity are aligned with the wealth tax reduction for investment in SME’s.
Losses from crowdlending
  • In the event of a capital loss that occurs through non-reimbursement of sums lent by "crowdlending", said loss is imputable on the interests arising from loans granted in the same conditions received during that year and the next five.
Products eligible for PEA-PME account
  • As of January 1st, 2016, may be registered on the PEA-PME securities account, those of a listed company subject to the following conditions:
    • the company’s market capitalization is less than €1 billion,
    • no legal entity holds more than 25% of the capital and
    • the company employs fewer than 5,000 people and has an annual turnover not exceeding €1.5 billion, or a balance sheet total of €2 billion.
  • Listed convertible or redeemable bonds may also be registered.
Non residents

Withholding tax levied on ordinary attendance fees

  • The French tax law states that a withholding tax of 30% must be levied on the payment of attendance fees made to non-residents. As of January 1st, 2016, European Union’s and European Economic Area’s taxpayers may obtain a refund of the excess of withholding tax levied on ordinary attendance fees paid. The excess will be constituted by the difference between the withholding tax levied and the tax that would have resulted had the progressive scale been applied to this income.

Abolition of the flat-rate taxation for non-residents

  • The taxation on a fixed basis equals to three times the rental value of the properties owns by non-residents in France is abolished for the taxation of the revenues of 2015.

Authors