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ADVICE #90

Peculiarities of the tax system of France

Despite the fact that almost all European countries are committed to the unity of laws and integration in the areas of economic and social policies, tax systems of European countries do not differ with unity.

Russian analysts of the consulting company "Texart Group researched the tax system 38 European countries with developed market economies, and weak, still "wobbly" after the collapse of the socialist states.

Some of the investigated countries are already EU members, others are candidates for membership in the single currency area, but in the meantime, in most States, a United Europe, you may encounter drastic differences in tax systems and the principles of taxation.

If you are going to live abroad and operate your business, you should carefully review the tax code of the country: what size of income tax in this country; the amount of tax "at the source"; VAT; what are the taxes levied on the income of individuals and their property, and more.

We offer to your attention an analytical report with detailed information about the economy, the characteristics of the market, as well as tax rates and the criteria for levying taxes in each country of Europe.

France is an EU member and the second economy in the Eurozone after Germany.

The income tax

Under a tax resident is a company, registered in accordance with the laws of France or having its place of effective management. Tax on profits of enterprises (both residents and non-residents) in France is organized on a territorial basis, i.e. the tax is levied only on income derived from operations in France. The exception is passive income residents (dividends, interest, royalties) from sources outside of France. The tax does not allocate certain types of profit-free in a special manner: all of the company's income (including capital gains) are taxed on the profit by the total bet. However, there are exceptions: for example, when selling shares of companies whose shares are publicly traded and whose assets consist of more than 50% of immovable property, income arising from the capital gain will be taxed at the reduced rate of 19%.

The total tax rate on profit is 33.33%. Small business provides benefits: small and medium enterprises (SME) with a turnover of less than 7 630 000 €, 75% of the shares which belong to individuals or to other SME taxed on profits at a rate of 15% for income up to 38 120 €, and the standard is applied to amounts exceeding this threshold.

Large enterprises, i.e. companies whose turnover is more than 7 630 000 €, subject to an additional social gathering of 3.3% levied with an average amount of tax calculated at the standard rate (thus, the General rate for these companies is 34.43%).

With 18.08.2012 resident companies distributing dividends are required to pay an additional 3% of the total amount of dividends paid.

Withholding tax

Dividends, interest and royalties received by resident companies are exempt from withholding tax.

Dividends distributed to nonresidents are subject to withholding tax at a 30% rate (unless otherwise SODNOM, or PSD) or 15% if the dividends are distributed in favor of a foreign nonprofit organizations.

Interest payments are not taxed at source.

Royalties paid to nonresidents are taxed at the rate of 33.33% (SODNOM may establish other rates).

VAT

The French law regarding the VAT is harmonized in accordance with the Regulations and EU Directives in respect of VAT. The tax rate is 20%. Small and medium enterprises (turnover less than 81 500 €) are not subject to VAT. Also not VAT-exempt operations in providing financial and banking services, sale of buildings, services in the field of health care and services provided to nonprofit organizations. Perhaps the use of 10% of rates for transportation of persons, organization of games and entertainment. The reduced rate of 5.5% is applicable in respect of essential goods. Rate of 2.1% applies to printed publications.

Taxation of incomes of physical persons

Personal income tax on all income regardless of the country of origin shall be paid by residents and non – residents in respect of income from sources in France. The responsibility for filing tax returns is always on an individual taxpayer.

The subject of taxation may be as an individual taxpayer and family (so-called "family unit").

A tax resident is a person in France with the place of permanent residence, a permanent job or a center of economic interest. The subject of taxation is the household. By French law a progressive tax scale, taking into account the coefficients assigned to the household depending on the family composition (married, widow / widowers, singles) and the number of minor children.

Income up to 5 963 € per month not taxable; income from 5 963 € to 11 896 € are taxed at the rate of 5.5%; from 11 896 € to 26 € 420 and at the rate of 14%; from 26 420 € to 70 830 € – at a rate of 30%; from 70 to 150 830 000 at the rate of 41%; income above 150 000 € – at the rate of 45% (Thresholds progressive scale indicated on 2013).

In addition, any special social contributions in respect of residents, reaching 15.5 percent of income.

This is interesting:

Besides the basic income tax of natural persons, since 2011 they use fees at the rate of 3% on incomes over 250 000 € (500 000 € for families), and 4% on incomes in excess of 500 000 € (1 000 000 € for families). The Assembly is established in connection with the budget deficit of France and will be charged to the time when you have reached a balanced budget.

A number of income in respect of natural persons is taxed at constant rates, or not taxed at all. Tax unemployment benefits and severance payments are not taxed, as well as income not exceeding 8 610 € per year (9 410 € per year for people over 65 years of age).

Dividends received by an individual resident from resident companies are taxed at source on a standard scale in respect of only 60% of dividends paid. Dividends in respect of non-residents-members of the EU are taxed at source at a rate of 21% (for non-residents – interest rate 30%).

Interest payments when paid to nonresidents is not taxed at source (except for the payment of so-called residents NCST/low-tax jurisdictions – in this case the rate of 75%).

Non-residents pay tax on payments of royalties at the rate of 33.33% (75% in relation to the resident NCST).

The real estate tax of individuals

The property tax in France is local and charged in respect of any immovable property owned on January 1 of the reporting year. In relation to built-up areas, the tax base is determined by applying certain coefficients to 50% of nominal/imputed rental income (as defined by the local authorities). In respect of undeveloped lands applies a similar formula in respect of 80% of the nominal rental income.

The text prepared by the Russian consulting company TaxArt Group LLC specifically for Banki.ru

Франция

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