Expatriate tax ebook - France

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax

• Tax on capital gains on shares

Annual exemption for the sales of shares not exceeding €25,830 for 2010 is available (however specific social levies apply from the 1^st € for French residents). Sales in excess are taxed from the 1st € at an 18% tax rate, (or a 50% rate applies for individuals who are resident in a non-cooperative country or territory as from March 1^st 2010).

• Tax on capital gains on real estate
  For calculating the taxable capital gain on real estate, a 10% tax allowance per year of ownership is available after the fifth year of ownership, that involves a tax exemption after 15 years of ownership.
  
  An exemption is available for the main home. A flat tax rate of 16% applies for the capital gains realised on real estate by individuals, resident in France (plus specific social levies), within the EU or in one of the EEE (Liechtenstein excluded) member countries. For other individuals, tax is levied at 33.3% (or a 50% rate applies for individuals who are resident in a non-cooperative country or territory as from March 1^st 2010).

Inheritance, estate & gift taxes
A liability to French inheritance and gift tax depends not only on the French tax residence position of the deceased/donor and of the beneficiary, but also on the French location of real estate and assets when the deceased/donor is not resident in France. The rates vary depending on the degree of relationship between the donor and the beneficiary.

Investment income
The expatriate's French tax residency status will determine whether investment income such as interest, dividends etc, will become liable to French income tax.

Dividends can be subject to income tax. A 40% allowance on dividends received is available for French residents for tax purposes for the calculation of the income tax at the progressive income tax rates, plus specific social levies. They are also entitled to a tax credit of 50% of the dividends received capped to € 115 / € 230 and to an annual allowance of € 1,525 / € 3,050.

Alternatively, the recipient of dividends can opt to be subject to a 30.1% flat rate (including the additional 12.1% social contributions). In this case, no tax allowance applies.

Local taxes
There are local taxes (dwelling, developed properties, undeveloped properties) to which an individual is liable in France.

Real estate tax
See 'capital gains tax' above

Social security taxes
(As at 1st January 2010)
'National Insurance Contributions'

Also:
Non executive
Self employed
Non-employed
Specific social levies

French residents are subject to 12.1% social contributions - 8.2% contribution (called CSG), 0.5% contribution (called CRDS) and 2.3% and 1.1% social levies - on their property income, capital gains, as well as on their fixed interest securities, dividends. Part of the CSG (5.8%) is deductible from the taxable income the year after payment of the contribution, except when the 30.1% rate applies on dividends.

Stock options
The advantages of such schemes are taxed as part of employment income at the progressive rates, unless they qualify for specific tax and legal regime providing for:

• a taxation at flat rates of 18%, 30% or 40% of the profit deriving from the exercise of option (difference between price of exercise and market value at the date of exercise).
• a taxation at a flat rate of 30% on the market value of the shares at the time they are freely given for shares incentives plans providing free shares to employees and implemented as from 1 January 2005.
• for options and free shares granted as from 16 October 2007, a 10% employer special social security contribution and a 2.5% employee special social security contribution apply.

Tax is levied at the time of the sale of shares except the 10% employer special social security contribution which is levied at the time of the grant of shares.

Capital gains in excess are treated as capital gains on shares.

Wealth tax
Individuals who become French residents are taxable on their worldwide assets (real estate, shares, bank accounts etc) if the net value
of these global assets exceeds €790,000 on January 2010.

Other specific taxes
There are no other specific taxes relating to expatriates in France.

Information about France:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities