It is against a backdrop of sluggish economies, abysmal fiscal deficits and a popular feeling of fiscal pressure that the 2014 Finance Bill has been adopted. What should investors expect?
Article updated with regard to the 2014 Finance Law published in the Official Journal on 30 December 2013.
After two years of freezing, the tax scale is again indexed to inflation, a revaluation of 0.8%. As a result, the scale is as follows:
- up to 6,011 euros: 0%
- between € 6,011 and € 11,991: 5.5%
- between 11 991 euros and 26 631 euros: 14%
- between 26,631 euros and 71,397 euros: 30%
- between 71 397 euros and 151 200 euros: 41%
- over EUR 151 200: 45%
As of January 1, 2014, the tax regime for capital gains on the sale of securities introduces two plans:
– The common law system retains the principle acquired since January 1, 2013 of taxation according to the tax rate schedule on capital gains realized by individuals. Only the staggering of the allowances is modified in order to encourage the lengthening of the period of detention:
. Less than 2 years: 0%
. Between 2 and 8 years old: 50%
. Beyond 8 years: 65%
– The derogatory regime , dedicated to SME securities under 10 years old, replaces existing schemes (disposals for retirement, within the family group, etc.) and is intended as an incentive. The flat-rate taxation of the capital gain at 19% disappears in favor of an abatement grid:
. Less than 1 year: 0%
. Between 1 and 4 years old: 50%
. Between 4 and 8 years old: 65%
. Beyond 8 years: 85%
On the other hand, there are no more exceptional schemes for entrepreneurs, except for a fixed allowance of € 500,000 for retired business owners, which applies before the allowance provided for by the derogatory regime.
Social security contributions remain, in both plans, due from the first euro.
There are no changes to the taxation of savings products and dividends.
Real estate gains
Taxation according to the income tax schedule
The measures adopted take the form of:
- a reduction of the detention period from 30 to 22 years to benefit from a total exemption from the flat tax;
- more favorable term allowances: 6% per year beyond the 5th year and 4% per year for the 22nd year of past imprisonment;
- an exceptional 25% rebate applicable on real estate gains resulting from the sale of real estate or rights to these properties (other than building land) for disposals made from September 1, 2013 to August 31, 2014.
This allowance may, under certain conditions, be extended until 31 December 2016.
At the same time, a deduction for the duration of detention on social security contributions applies:
- 1.65% for each year of detention beyond 5th to 21st;
- 1.60% for the 22nd year of detention;
- 9% for each year beyond the 22nd.
Building plots are finally applied the same allowances, both on the income tax side as on the social security side.
In the field of real estate in general, the rate of the land registration tax or the registration fee can be increased by the general councils of 3.80% up to 4.50% for the transactions formalized between the 1st March 2014 and February 29, 2016. This possibility will naturally have an impact on the “notary fees” paid during a real estate transaction.
Tax Niches and ISF Capping
The tax loopholes were not affected by the 2014 Finance Law. Their ceiling remains fixed at € 10,000.
In addition, neither the scale nor the tax threshold of the ISF are re-evaluated.
Creation of PEA-PME
In order to promote the financing of SMEs and midcaps, the 2014 Finance Law establishes the creation of a PEA-PME, specifically dedicated to this category of companies.
Reform of the taxation of life insurance
Exemption from inheritance tax for life insurance contracts of less than € 152,500 seemed a few weeks ago in the eyes of the legislator. Fortunately, it is not questioned.
Other inheritance taxes are unchanged.
Nevertheless, the 25% rate hitherto applied above 902,838 euros goes up to 31,25% beyond 700,000 euros. It remains at 20% between 152500 and 700000 €.
Social deductions of 15.5% are also applied on the gains in case of withdrawal. The new measure, passed in the framework of the Social Security financing bill for 2014, raises the social security contribution rate to 15.5% for all multi-support contracts.
For single-currency contracts in euros, social security contributions of 15.5% continue to apply each year even if there is no withdrawal.
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