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Government ready to u-turn on start-up tax

France's Socialist government signaled on Thursday it was prepared to review its plans to hike the tax on the sale of companies that investors warned threatens to cripple the high-tech start-up sector.

Government ready to u-turn on start-up tax
Photo: Flickr user jyc1

Finance Minister Pierre Moscovici said he was ready to consider making changes to the government's tax plans.

"If there are measures that will have a shock or dissuade investment in new, innovative companies, then we'll have to look at it again," he said on France Inter radio.

"When measures are poorly calibrated, there has to be a possibility for dialogue and a correction," he added.

Moscovici and the government's junior minister for small and medium-sized business, Fleur Pellerin, were to meet later Thursday representatives of start-up companies that feel threatened by the new measures.

Last week France unveiled its biggest package of tax hikes and spending cuts as it seeks to bridge a €37 billion gap in public finances to meet its EU commitments to reduce its public deficit.

"Today, the highest rate (of tax on the capital gain for the sale of shares or company ownership) is 58%, and in the discussions we will hold, we will make adjustments to ensure there isn't something very penalizing against creating new businesses and innovation," Pellerin said on RMC radio.

She said the government was looking at possible adjustments to tax breaks.

The Socialists plan to bridge the fiscal gap relies heavily on raising taxes on businesses and the rich, but they have also targeted improving the competitiveness of French business in order to stem rising joblessness.

Start-up entrepreneurs, who often invest personal funds and take little salary from their new companies in the hope of later selling them for a big return, warned the changes would mean they had little prospect of financial reward from innovation in France and likely encourage people to move abroad.

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TAX

The vocab you need to understand French taxes

Declaring and paying taxes in France can be a complicated affair, especially for first-timers, and the intricate French vocabulary does not exactly simplify the process. This language guide might help.

The vocab you need to understand French taxes
Illustration photo: Miguel MEDINA / AFP

If you are encountering the French tax system for the first time, just looking at the various forms can make you dizzy, as the vocab isn’t exactly everyday-French.

Even French natives sometimes struggle to understand what they are being asked about, which is why the government has created a tax lexicon (available HERE).

It is 23 pages long, but we have picked out the key terms and added a few that might be unfamiliar to foreigners.

If, however, you are looking for a specific term that doesn’t appear in the list below, we recommend you check the official guide. 

We have also explained in detail how to fill out the annual tax declaration HERE.

Nom – as with all French forms, nom refers specifically to your surname or family name. Your prénom (first name) comes later. Tax forms generally ask for your nom de naissance which is the family name you were born with (even if you have changed your name through marriage) and will then ask for nom auquel vos courriers seront adressés or name for correspondence to be addressed to.

EXPLAINED: What’s in a name? Understanding how to fill out forms in France

Avis d’imposition – tax notice. This is for your annual tax return. If your main residence is in France you must fill in a tax return – even if all your income comes from another country. France has double taxation agreements with most countries, so if you have already paid tax on, say, income from a rental property in the UK you will not be liable for more tax in France on the same income. But you must still tell the French tax man about it.

EXPLAINED: Who has to make a tax declaration in France in 2021?

Déclarant – refers to the person declaring the taxes. The verb is déclarer and un déclarant is la personne qui déclare – the person who declares. The form has spaces for two déclarants because married couples and those in a civil partnership file a joint return. If you are declaring as a single person just ignore the column for déclarant 2.

Foyer fiscal – tax household. France bases taxes on the household and you will be asked about it in detail when filling out your declaration. Couples who are married or in a civil union (Pacs) should make one joint declaration rather than two. If you got married halfway through the year you can now declare one common declaration for the whole year.

Etat civil – civil status. Choose between célibataire (single), marié (married) or Pacsé (in a civil partnership). 

Parent isolé – single parent. This only goes for those who were not living with a partner on December 31st the year before declaring the taxes. If you got divorced, separated or lost your partner after that date, you have to wait until next year to declare it. In addition to parents, this category also includes singles who are taking care of a disabled person.

Enfant mineur – child under 18 years old.

Enfant majeur – a child over 18 years old. Parents in France may attach their adult child to their tax declaration until the age of 25, under certain conditions.

READ ALSO: What the French government doesn’t tell you about filing taxes

Personne à charge – means ‘person to take care of’, and means that you have a person in your household that you are financially responsible for, usually referred to in English as a dependant. 

Concubinage – a couple who live together but aren’t married or in a civil partnership. If that’s you, you’re not allowed to tick the box of parent isolé if you have children.

Numéro de sécurité sociale – social security number. If you’re registered with French social security this number (15 figures) appears on your Carte Vitale health card and if you’re an employee it should appear on your payslips. If you don’t have a social security number in France, tick the box “pas de numéro de sécurité sociale“.

Prélèvement à la source – This sounds confusing, because it’s sometimes translated as “withholding tax”. However it just means the tax that is automatically deducted from your salary each month if you are an employee. Usually referred to in English as ‘taxation at source’ or PAYE (pay as you earn), it’s a relatively recent innovation in France.

READ ALSO: The French tax calendar for 2021 – which taxes are due when?

Revenus des indépendants – income for the self-employed. Whereas employees get their taxes deducted automatically from their payslip, self-employed people, contractors or freelancers have to declare all their income and social benefits, if any, on their tax declarations. 

Micro-entrepreneur – this is a specific professional status that self-employed people may opt for if their income is below a certain threshold. It used to be known an auto-entrepreneur.

Comptes à l’étranger – foreign bank accounts. If you have a bank account in a country other than France, you have to declare that to the tax man, or risk a €1,500 fine (€10,000 for those with an account in a country that doesn’t have a tax evasion deal with France) per account. New international banking rules aimed at money-launderers mean it is increasingly easy for countries to find out this information.

Contribution à l’audiovisuel public – this means ‘contribution to the public audiovisual’. It is the French equivalent of a TV licence and is paid by almost everyone. You pay it if you have a TV in your property, even if you don’t watch French TV.

Abattement – rebates. France has a long list of specific tax rebates, some of which are directed professional groups while others go to parents for costs like childcare and domestic help. Find out more about the deductions available here.

Paiement en ligne – online payment.

Coordonnées bancaires – bank information (such as the account holder’s name, account number, BIC and IBAN) you are given the option to add this to your tax declaration so that payments can be taken – or refunds credited – directly.

Taxe d’habitation – the housing tax paid by those living in a property, not the owner, is in the process of being phased out and most people won’t have to pay it this year. However second home owners are excluded from the phasing out and still have to pay it, bar a few exceptions. This is separate to the annual tax declaration and bills are sent out in the autumn.

Taxe foncière – this is the tax for property owners, second home owners pay both this and the taxe d’habitation. The tax on property owners has risen in many areas over the past couple of years.

READ ALSO What is taxe foncière and do I have to pay it?

Revenus fonciers – this means ‘property income’, but it only refers to income coming from properties that are rented out unfurnished. If you rent out a furnished property that also has to be declared, but under the box called bénéfices industriels et commerciaux (BIC).

READ ALSO: Five things to know about renting out your holiday home in France

Micro foncier – the box to tick if the revenus fonciers are up to €15,000 annually, which allows for a 30 percent tax rebate on the gross income.

Régime réel – the box to tick if the revenus fonciers exceed €15,000 annually, in which case there won’t be any tax rebate available.

Pensions – pensions. You have to declare any pensions you receive, whichever type it may be, even if they are paid by another country. There are several other similar terms that belong to the same category as pensions.

Allocations – economic help schemes.

Indemnités – allowances.

Retraites – pensions.

Rentes – annuities. 

Prime – bonus.

Revenu brut – gross revenue.

Revenut net – net revenue.

Demande gracieuse – means ‘gracious request’ and is what you may do if, upon receiving your tax notice, you realise you could have paid less tax if you had ticked a different box somewhere or given additional information. The term ‘gracious’ is there to signify that the tax man can choose to accommodate your request if he so pleases, but there’s no rule saying he has to. As a general policy we would recommend always being very polite to tax authorities.

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