New régime concerning capital gains from transfers of securities:
The 2014 Finance Law modifies the personal income tax regime applicable to capital gains derived from transfers of securities which are realized as from 1 January 2013 (except for certain gains which would have been totally or partially exempted under specific regimes which are repealed by the 2014 Finance Law). Capital gains derived from transfers of securities remain subject to the personal income tax progressive scale, but now benefit from increased progressive deductions:
for any securities:
50% of the amount of the gain is exempt where the corresponding securities have been held between two and eight years;
65% of the amount of the gain where corresponding securities have been held for more than eight years;
for securities in certain small- and medium-sized enterprises (petites et moyennes entreprises, SMEs) which are subject to corporation tax and carry out an operating activity, provided inter alia that such securities have been acquired or subscribed when the relevant SME had less than 10 years in existence:
50% of the amount of the gain is exempt where the corresponding securities have been held between one and four years;
65% of the amount of the gain is exempt where the corresponding securities have been held between four and eight years;
85% of the amount of the gain where corresponding securities have been held for more than eight years.
Real estate capital gain tax for individuals
For sales made after 1 September 2013, a full tax exemption of the real estate gain applies after a holding period of 22 years (but for social security contributions the holding period remains at 30-years). Before the 22-year holding period, there is a tax reduction of six per cent for each year of ownership beyond the sixth year and the twenty-first year, and of four per cent for the twenty-second year of ownership.
In addition, an exceptional reduction of 25 per cent also applies to the sale of real estate properties made after 1 September 2013, but only for a period of one year.
Nonresidents capital gains on real estate
The legislation amends the scope and implementation rules of the specific exemption that can benefit nonresidents on the sale of their home in France. First, by waiving the condition of free disposal of the property where the transfer is completed no later than 31 December of the fifth year following the transfer of tax residence outside France and second, by introducing a cap of €150,000 of the net capital gain that is tax exempt.
The total amount of real estate transfer duties to be paid by the purchaser of a property is increased in 2014 from 5.09 per cent to a maximum of 5.80 per cent of the purchase price.
New French Declaration of Interest & Dividend Income
There is a new filing obligation requiring income & CSG/CRDS (at 15.5%) taxes to be withheld at source on interst and dividend income on a current basis. The new rules went into effect as of January 1, 2013.
For your French source interest & dividends, the bank will automatically apply the prélèvement (withholding), which is 21% for dividends and 24% for interest. Taxes paid in advance through the withholding will be taken in to account when your final tax bill is issued.
The text of this new law mentions that in the case of foreign source interest & dividends, given the bank or other financial institution is located outside of France, the onus is on the taxpayer to be compliant and make the necessary contributions through the filing of forms 2778-DIV and 2778-SD. Failure to do so will result in penalties.