A summary of French tax rates 2020.
Reduced tax rate for lower income in France for 2020
The main change is a reduction in the income tax rates for calendar year 2020. With the inntroduction of a PAYE (pay as you earn) system – the 2020 budget includes the income tax bands and rates for both 2019 and 2020.
French Income Tax rates for 2019
Tax rates remain the same as last year, but bands have been indexed for inflation.
Up to €9,964: Nil
€9,964 to €27,794: 14%
€27,794 to €74,517: 30%
€74,517 to €157,806: 41%
Over €157,806: 45%
French Income Tax rates for 2020
The starting tax rate is reduced from 14% to 11%: This will save taxpayers in this bracket around €350 per year. On the other hand, the 30% rate now starts at €25,405 instead of €27,794.
Up to €9,964: Nil
€9,964 to €25,405: 11%
€25,405 to €72,643: 30%
€72,643 to €156,244: 41%
Over €156,244: 45%
Flat tax on investment income in France
The tax rate for investment income remains unchanged at 30% (inc. social charges) for 2020 income.
French social charges
No changes were announced for social charges, so it looks like they will remain as:
9.7% for employment/self-employment income
9.1% for pension income
17.2% for investment income including rental income.
Tax on Assurance-Vies in France
The initial budget draft did not include any reforms for the taxation of an Assurance Vie. Four early amendments which would have introduced significant changes were proposed but then rejected. The fourth was debated but it looks like it was also rejected, so hopefully we will not see any changes to Assurance-Vies in 2020.
Real Estate Wealth tax and Succession Tax in France
The current threshold of €1,300,000 for the ‘IFI’ real estate wealth tax will stay in place for 2020, with no changes to the scale rates of tax. The 75% limitation also remains unchanged.
The budget did not include any reforms for Succession Tax rates and allowances.
The changes to this local residence tax, announced in 2017, continue to remove households from Taxe d’habitation. While some already escape this tax, the number increases so that next year only 20% will have to pay it. By 2023 it will be completely abolished.
Corporation tax in France
One of the main measures of the bill includes amendments regarding the scheduled reduction in corporate tax rates, which began in 2018 but was partially reversed for large companies for 2019. The amendments provide that for companies with annual turnover of EUR 250 million or more are confirmed as:
- The rates for the year 1 January to 31 December 2020 are 28% on the first EUR 500,000 and 31% on the excess; and
- The rate from 1 January 2021 is 27.5% for all income.
For companies with turnover below EUR 250 million, the scheduled rate reductions provided for in the 2018 Finance Law are unchanged, including:
- a 28% rate from 1 January 2020 and
- a 26.5% rate from 1 January 2021.
- In addition, the rate will be reduced to 25% for all companies from 1 January 2022, as scheduled in the 2018 Law.
The bill also clarifies that the withholding tax rates based on the corporate tax rate will continue based on the corporate rate for companies with turnover below EUR 250 million. The alignment of the rates was introduced by the 2018 Finance Law, including for capital gains on the sale of substantial participation in French companies from 2018, for royalties from 2019, and for dividends from 2020. As such, the withholding tax rates are 28% in 2020, 26.5% in 2021, and 25% from 2022
Written by Paul Flintham, International Financial Adviser, Beacon Global Wealth Management; Email: paul @ bgwealthmanagement.net; beaconglobalwealth.com
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