News.                

2008

  • New inward expatriate system allows 5 year exemption of non-French assets

France recently implemented new legislation designed to improve the tax situation of high net worth individuals who decide to establish their tax residence in France. Such individuals are referred to as "inward expatriates" by the new law.

Where a person who has not been a resident of France for the last five years intends to set up residence in France, that person will now automatically benefit from a 5 year wealth tax exemption on all assets that are not situated in France. There are no other conditions set by the new law; notably, the person doest not need to be sent to France by a non-French employer; there are no restrictions as to the amount of wealth that can be exempted from wealth tax; all natioanlities (including the French) may benefit from the exmption.

Where the individual is sent by an employer to work in France for a designated period of time, that person may qualify for other additional 5 year exemptions, and in particular a 50% exemption on passive income from non-French sourcesmost interest, dividends and capital gains).

That person may also be exempt on a significant portion of his or her salary. The exempt salary may represent up to 50% of the total salary, depending on certain factors.

Of course, the above exemptions combine with the 50% tax shield and represent an important step that pictures France as a very competitive country in terms of individual taxation.

The 5 year wealth tax exemption on non-French assets suggests an increasing use of non-French Life insurance policies and similar capitalization schemes offered by certain life insurance companies, notably in Luxemburg.

When such policies are properly opened before the taxpayer's arrival in France, not only will the funds be wealth tax exempt for five years, but they will also be distributed to the heirs without any inheritance tax due.

Jouanjan & Partners is at your or your clients' disposal to discuss a personalized approach to French Tax Planning using the latest opportunities offered by the French Tax System.

 

2008
  • New Tax Shield in force 

France recently implemented a new Tax Shield system which ideally combines with capitalization bonds, life insurance and tax deferral schemes to form the fundamental basis of efficient tax planning. 

Under the new Tax Shield system, an individual's direct taxes (i.e.: income tax, wealth tax, social contributions, and local property taxes for main residence) may not exceed 50% of his or her taxable income.

Now, for example:

  • dividends are taxable on 60% of gross distribution only
  • drawdowns from qualifying bonds are taxed on the income element only

The appropriate combination of the above two schemes makes it possible to ensure that an individual's effective tax rate will be below 30%, including all social contribution, where income is composed of dividends exclusively. This rate can be brought down significantly by an appropriate use of bonds.

For non-residents moving to France, it is possible to ensure minimal taxation if proper steps are taken prior to the person's arrival in France.

 

2008
  • New Research & Development Credit in force 

The new system applies starting 1 January 2008.

All companies engaged in R&D schemes may obtain a credit equal to 30% of their qualifying R&D expenses that up to expenses of 100m€ (personnel, depreciation of assets, subcontracting expenses, etc). The rate is 5% for the portion of expenses exceeding 100m€. There is no maximum any longer (the maximum absolute credit used to be 16m€).

For companies that apply for a R&D credit for the first time in 2008 or later, the 30% rate is increased to 50% for the first calendar year, and to 40% for the second calendar year.

The credit is used to pay corporate tax and any excess credit is refunded after three years.

 
 
 
 
 
 
 
 
 
 
 
 
 
Home  Disclaimer  
Paris
London
New-York