Positive winds of change in the world of French tax

As promised by president Emmanuel Macron, a set of tax measures that are advantageous for both companies and individuals came into effect on 1 January 2018. These measures are part of a move to reduce and simplify French taxes.

Below are the three key provisions introduced with the aim of increasing the attractiveness of French taxation and encourage investment.

Decrease in corporate tax

The decrease in corporate tax, initiated at the time of the 2017 finance bill, continues. Beginning on 1 January 2018, the ordinary tax rate has decreased from 33.1/3% to 28 % with a view to reaching 25% in 2022.

Introduction of a single flat rate tax on capital income

In order to simplify the taxation of savings income, which had become very complex, the government introduced a flat rate tax of 30% – 12.8% income tax and 17.2% social taxes – on all capital income, including capital gains, interest, dividends and other related revenues.

Non-residents will also benefit from these lower taxes.  From now on, the withholding tax rate will be of 12.8%, irrespective of the distributed product and the beneficiary’s country of residence. Only the rate of 75% applicable to non-cooperative states and territories will remain unchanged.

Introduction of a real estate wealth tax

The 2018 finance law has finally removed the wealth tax (ISF) and replaced it with a real estate wealth tax (IFI), which is not calculated on the basis of securities, but which does however pose new questions related to the indirect ownership of property rights.

This rate applies to profits of up to €500,000 for all companies, unless the reduced rate of 15% applies.  Beyond this limit, the 33.1/3% rate will apply.