According to the Financial Times in its edition of the 17th of September, France is “Europe’s new engine”. Indeed, as the worldwide trade war starts biting Germany’s economy, France has been able to shine thanks to its strong economy and attractive measures.
US nationals in France must pay US income tax on their French income, but they are able to deduct the amount of tax in France against their U.S. tax liability. However, in 2008 the IRS began turning down these deductions. Since then, legal action has been launched in the USA by Americans whose deductions had been declined. The U.S. court has overturned the decision of the IRS and as a result the social charges will be accepted by the IRS as a tax and not as a social security contribution and American expats in France are entitled to a refund for the over-payment of US taxes in the past.
The French government has announced another reduction of income tax for the next year, growing France’s attractivity. The main change comes in the band of income between 9,964€ and 27,519€ with a reduction of 3% from 14% to 11% but also a reduction of the threshold down from 27,4519€ to 25,405€. The 41% rate threshold has also been reduced from 73,779€ to 72,644€.
The Macron government has decided to extend a scheme previously knowned as ACCRE to all new start-ups. This new change will mean that those who set up a business under the regime reel will obtain a reduction in social security contributions for one year following the registration of their business. Micro-Entreprise will also benefit from the scheme, but over a longer period of three years. With these changes who will be automatically granted to all new registrations from the 1st of January, the French government is changing the old “tax-heavy” image of France and confirming that France is now “open for business”!
Why abolish this tax? The exit tax should have prevented people from leaving France, but in reality the exit tax prevents people from coming to France! For many entrepreneurs the real reward for the risks and efforts taken in developing a business is the opportunity of a profitable exit – generating a material lump-sum profit on selling the business. Mr Macron and his government are convinced that potential investors (for example start-up companies) see the exit tax as a break and limitation of their liberty of movement.
With the ongoing visit of the French president to the USA, it appears clear that the relation between the two presidents is excellent. This successful visit is bringing confidence to investors and all the companies related to both countries. It is expected that deals will be made to ease investments between the two countries.
Since the election of Emmanuel Macron at the presidency last year, France’s economy has been improving very quickly.
The Economist records the unemployment has been falling persistently every week since the young president’s election.
The official rate is now at 8.9%, way under the 10.5% of last year.
Prospects are looking more positive with a renewed confidence and customer spending following the new employment laws enacted by Macron, as well as the ongoing reforms.
Angela Merkel has suggested that Germany and France will soon press ahead with plans to harmonise aspects of their corporate tax regimes.
Progress is expected to be made by the end of 2018.
French Finance Minister Bruno Le Marie said that the two governments want to agree a joint position on convergence issues, including in the area of corporate taxation, by mid-2018.
The French Government is going to unveil additional tax cuts next year to encourage London's bankers and financiers to relocate to Paris.
According to a report in Les Echoes, the tax cuts will focus on reducing the level of employer social security contributions for high-salary workers, a promise already made by Emmanuel Macron.
It is believed that the French Government wants to reduce social security contributions to a level similar to those in Germany, where contributions for high-income earners are capped.
The move will increase competition between Paris and Frankfurt for the thousands of financial sector jobs that will be relocated from London.
French deputies have adopted the 2018 Finance Bill which includes several of the Government's key tax measures.
The bill, adopted by the National Assembly on October 24, includes the removal of the wealth tax (ISF) and replaces it with a real estate tax (IFI). Investment income will be removed from the scope of the wealth tax. Instead, capital gains, dividends, and interest will be taxed at a flat rate of 30 percent. The finance bill also includes a housing tax deduction, benifiting most of the households.
The French Government has confirmed in the 2018 Budget that taxes and compulsory levies will be heavily reduced.
The budget includes much expected reductions in corporate tax, improvements to social security contributions and a tax cut for finance sector employees.
The 2018 budget plans to reduce corporate tax to 28 percent on income up to EUR500,000. The current rate of 33.33 percent will be lowered to 31 percent in 2019 on profits in excess of EUR500,000 (the 28 percent lower rate remains).
Corporate profits will later be taxed at a single rate of 28 percent from 2020, then cut to 26.5 percent in 2021 and to 25 percent in 2022.
In an effort to push high-income workers in the finance industry to relocate from London to Paris amid Brexit uncertainty, the Budget also includes measures to reduce tax on salaries exceeding EUR152,279.
French Environment and Energy Minister Nicolas Hulot has give details on the government’s plans new tax measures and government subsidies who aim to improve France’s clean energy plan.
The proposals who will be included in the Finance Bill for 2018 were revealed in an interview. They include improved subsidies for households installing better insulation and more efficient heating systems as well as for those exchangeing petrol- or diesel-powered cars for newer, cleaner models, including hybrids and electric-powered cars.
In addition, an existing EUR500 (USD600) to EUR1,000 scrappage scheme for car owners willing to change their old cars into cleaner models will be extended to all car owners, regardless of income.
This new tax plan confirms the position of France on clean energy and efforts, in opposition with America’s recent pull out of the Paris Agreement, and is in cohesion with president Emmanuel Macron’s invitation to all green energy orientated companies to come do business in France.
The French Government has confirmed that it will go ahead next year with the promised changes to employee social contributions. These measures are expected to give a push to spending power.
Employee contributions for health and unemployment insurance will be phased out by the end of 2018.
As announced during his campaign, French president Emmanuel Macron has confirmed his wish is to reduce the current corporation tax (at 33.33% for profits above 75,000€) to a level closer to the European median (around 25%). While no exact date has been announced, word is the government is willing to launch the process in 2018. This is great news for all the entrepreneurs who own companies in France and confirms that the Macron government is going to be business-friendly.
UBS and HSBC have announced plans to move thousands of jobs to Frankfurt and Paris following Brexit. While this doesn’t come as a surprise, the officialisation confirms the aversion to uncertainty big companies have. The French government is expected to announce measures to make France as attractive as possible for job relocations due to Brexit.