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Is France set to postpone its flagship income tax reform… again?

A major reform is set to come into force from January next year that will see all workers have their income tax automatically deducted each month, but President Emmanuel Macron suggested on Thursday the landmark change could be postponed once again and perhaps even scrapped altogether.

Is France set to postpone its flagship income tax reform... again?
Photo: AFP

The major reform that was announced by the previous government under former President François Hollande was finally set to come into force in January 2019 after years of promises, talks and delays.

The change would see most workers in France have their income tax automatically taken out of their wages each month, as is the case in most other European countries, rather than the current system which sees employees pay income tax the following year.

The reform, which President Emmanuel Macron backed, was due to be implemented in January 2018 but was delayed a year because the new government wanted time to make sure the reform was actually worth it and to smooth out any problems.

But speculation has grown in recent days that the change may be put back once again just as more opposition voices have spoken up urging the president to scrap the plan altogether.

On Thursday Macron announced that he wanted some “precise responses” before deciding once and for all if  the change to income tax payments would be brought in in January.

“I have the intention to push this reform through on time but I have asked the relevant ministers to answer all the questions that still arise before giving a final directive,” said Macron.

“I need a series of very precise answers and to be sure of what our citizens will go through when this reform is introduced,” he added.

“It's normal that we make sure that all the details are clear. I want to see in detail what it means for each citizen.”

According to French newspaper Le Canard Enchainé Macron is ready to postpone a reform that would impact France's 38 million tax paying households.

The paper claimed the president will decide before September 15th whether to push ahead or delay it again.

The reform is obviously complex but the government has grown particularly concerned about technical bugs that may impact the new system as well as the psychology impact on tax payers who will naturally see a drop in their monthly salary on their pay slips.

Macron, already under pressure due to low popularity ratings, will fear the reform will give the French the impression that they are losing their spending power under his leadership.

The introduction of income tax at source has already been delayed until 2020 for certain workers such as privately employed home carers and child minders because the systems tasked with collecting their income tax will not be ready.

READ ALSO: How paying your income tax in France will change dramatically

 

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PROPERTY

The post-Brexit tax rules on selling second-homes in France

British second-home owners in France who want to sell their properties are being warned of an extra layer of administration - and expense - in place since Brexit.

The post-Brexit tax rules on selling second-homes in France

Brits wishing to sell property in France may now need to appoint a représentant fiscal (tax representative) in France in order to properly declare the sale to French tax authorities. 

Who?

This law applies to people who own property in France but do not live here – mostly that would be second-home owners but it could also apply to, for example, anyone who has inherited property.

This requirement has always been the case for non-Europeans such as Americans, Canadians and Australians and now also applies to Britons since the end of the Brexit transition period. People who live in another EU or EEA country are exempt.

The law is based on residency, not nationality. So if, for example, you have your main residence in the UK but have an Irish passport, you would still be covered by this requirement.

Exemptions

As well as EU residency, there are a couple of other exemptions;

  • If you sell your property for less than €150,000
  • If you have owned the property for more than 30 years (in which case the sale is exempt from capital gains tax and social security contributions).

What is a représentant fiscal?

This is simply a representative for tax purposes in France, and the person does not need specific qualifications in law or accountancy.

The following can be appointed:

  • A company or organisation already permanently accredited by the tax authorities;
  • A bank or credit institution operating in France;
  • The buyer of your property, if they are domiciled in France for tax purposes (they do not need to be a French citizen);
  • Any other individual who is domiciled in France for tax purposes (they do not need to be a French citizen) – in this case they will need to be accredited by the local authority;
  • If the property is in Paris, the individual will need to be accredited by the Île-de-France tax authorities – département de Paris-Pôle gestion fiscale Centre-Missions foncières, 6 rue Paganini, 75020 Paris. Tel: 01 53 27 46 45

If you decide to appoint an individual rather than a company as your représentant fiscale, bear in mind that the process can be quite complicated, so it would be better to check that they are confident in dealing with the tax authorities, to ensure that you don’t end up with unfinished business with the tax office.

If you chose a company, they will naturally charge for the service. 

Whichever representative you chose, you will need to provide a dossier of documents relating to the property sale and also confirming that you are a tax resident of a country outside France (tax returns, banking information, for example).

Will you have to pay tax on the proceeds of the sale?

If your main residence is not in France, you have no other income in France and you do not complete the annual French tax declaration you will not usually have to pay tax in France on the proceeds of the sale, provided your total estate is worth less than €1.3 million.

Properties worth more than €1.3million may be liable for the impôt sur la fortune immobilière (property wealth tax).

You will of course have to declare the income from the sale in the country where you are resident and, if applicable, pay capital gains tax.

What about French property taxes?

If you have owned property in France you will have been paying the taxe foncière and taxe d’habitation.

These will cease, but bear in mind that taxe foncière is charged based on who owned the property on January 1st of the relevant tax year. So if you sold your property in February 2022, you will still get a tax bill in autumn 2022 to cover that year. Only the following year will the new owner become liable, unless the sale contract for the property included an agreement to share or split outstanding taxes.

Find more information on the Internationals section of the French tax office website HERE or pay a visit to your local tax office in France. Find your local office by searching ‘Centre des Finances publiques’ plus the name of your commune – tax offices are open to the public on a walk-in basis and the staff are usually friendly and helpful. 

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