SUMMARY OF FRENCH TAX CHANGES IN 2012 - PART 2

WEALTH TAX ('ISF')

From 2012, there will only be two rates:

-For assets of which the net value is between 1,300,000 Euros (One million three hundred thousand Euros) and 3,000,000 (Three million Euros) a rate of 0.25% is applied to the totality

-For assets of which the net value is above 3,000,000 Euros (Three million Euros), a rate of 0.5% is applied to the totality

As a result, those tax payers whose assets are valued between 800,000 Euros (Eight hundred thousand Euros) and 1,300,000 Euros (One million three hundred thousand Euros) no longer pay wealth tax.

INHERITANCE TAX

 

As of 31st July 2011, the inheritance tax sliding scales have been modified. The modifications essentially concern the raising of the top rate from 40% to 45% for inheritance or gifts between ascendants or descendants, as well as for lifetime (inter vivos) gifts between spouses or PACS partners.

Direct line succession or donation (ascendants or descendants), fraction of the net taxable amount

Taxable amount after tax-free allowance

Rate

Below 8,072 €   

5%

Between 8,072 € and 12,109 €    

10%

Between 12,109 € and 15,932 €   

15%

Between 15,932 € and 552,324 €

20%

Between 552,324 € and 902,838 €   

30%

Between 902,838 €  and 1,805,677 €

40%

Above 1,805.677 €

45%

Gifts between spouses or 'PACS' partners, fraction of the net taxable amount

Taxable amount after tax-free allowance

Rate

Below 8,072 €   

5%

Between 8,072 € and 12,109 €    

10%

Between 12,109 € and 15,932 €   

15%

Between 15,932 € and 552,324 €

20%

Between 552,324 € and 902,838 €   

30%

Between 902,838 €  and 1,805,677 €

40%

Above 1,805.677 €

45%

The tax-free allowances remain the same as a result of the temporary freezing of inflation related indexation. The principal tax-free allowances are as follows:

 

-Between ascendants and descendants:    159,325 €

-Between brothers and sisters:                15,932 €

         (Above this, tax at 35% on the first 24,430 €, then at 45%)

-Between relatives to 5th degree:            1,594 €

         (Tax rate of 55%)

-Between non-relatives:                         1,594 €

         (Tax rate of 60%)

-Inter vivos gifts between spouses and PACS partners: 80,724 €

Other gift tax saving measures linked to the age of the donor have been removed, save concerning company shares.

In addition, the period of time following which a beneficiary would be entitled to a second tax-free allowance (another gift or an inheritance following an earlier gift), has been increased from 6 to 10 years. A system of tapering applies to existing gifts to mitigate the impact of this reform somewhat.