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French government on tenterhooks as new income tax regime rolls in

The French government sought on Wednesday to downplay fears that workers will be left out of pocket as the country transitions to a pay-as-you-earn tax system that could fan the flames of a revolt over spending power.

French government on tenterhooks as new income tax regime rolls in
Photo: AFP
After years of delays, France on January 1 ditched a system whereby residents file income tax returns based on the previous year's earnings, replacing it with a system where the state deducts the taxes directly from people's salaries or pensions each month.
   
Opinion polls show the French broadly supporting the change but the shift presents risks for President Emmanuel Macron, not least that workers may feel poorer when they receive their new net pay — even if they will no longer have to save up to pay their taxes three times a year.
   
Any glitches in the new system which could see taxpayers pay more than they bargained for could further infuriate the “yellow vest” anti-government protesters who have been demonstrating around the country since mid-November over Macron's fiscal policies, which they see as skewed towards the rich. 
 
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Photo: AFP

Visiting a tax query call centre in the northern city of Amiens, Budget Minister Gerald Darmanin attempted to assure the French that the change would be painless.
   
“Taxation at source is like the mobile phone. In a month's time we'll be wondering how we ever managed without it,” he said, calling it a “big step forward for the French”.
   
He attempted to silence the doomsayers, noting that so far there was no sign of the much-prophesied chaos and that the number of queries received by the call centre were on a par with an average month.
 
93 million letters
 
The shift to a pay-as-you-earn system was adopted by the Socialist government of Macron's predecessor Francois Hollande, but is only now being implemented, after some dithering by Macron on the issue.
   
To prepare the French for the change the government has sent 93 million letters and emails explaining the new system.
   
The move, which will only affect the 43 percent of households liable for income tax, brings France in line with most Western countries but comes at a 
critical juncture for the Macron.
 
French government to push ahead with taking income tax from workers' payPhoto: AFP
   
Over the past six weeks, “yellow vest” demonstrators — so-called after the high-visibility jackets they wear — have repeatedly clashed with police in Paris and other big cities, plunging Macron's presidency into crisis.
   
The “yellow vest” movement began in rural France over fuel taxes and quickly ballooned into a wider revolt against the 41-year-old president's pro-business policies and perceived arrogance by low-paid workers and pensioners.
 
In mid-December, he attempted to calm the rebellion by backtracking on a planned increase in anti-pollution fuel taxes.
   
He also announced 10 billion euros ($11.4 billion) in tax breaks and income support for the low-paid and retirees, setting back his deficit-reduction drive in the process.
   
Since then the protests have appeared to lose steam.
   
In his New Year's address to the nation on Monday, Macron vowed to resume his reforms programme in 2019, including trimming the sprawling public sector and shaking up the unemployment and pension systems, all potential political minefields.

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MONEY

Do you pay tax on cryptocurrency in France and if so, how much?

Cryptocurrency is big business in France but the rules on the taxation of income from the currency differ to other countries.

Do you pay tax on cryptocurrency in France and if so, how much?

Bitcoin. Ethereum. Tether. Mining. Binance. To the uninitiated, cryptocurrency can sound like a different language. But, in France, it’s big business, with an estimated 3.4 million people reportedly holding at least some “crypto”.

In May, France became the first major European nation to give approval for cryptocurrency exchange Binance to operate in the country.

But this does not mean the country is operating a light touch on cryptocurrency regulations – a fact Changpeng Zhao, Binance’s CEO and founder, recognised at an event in Paris in April to launch a government-backed programme for “Web3” start-ups.

As cryptocurrencies become more mainstream, more and more people may be looking to get on board. But, is it taxable? How is it taxable, and how much tax do you have to pay?

First things first: yes, cryptocurrency income is taxed. It’s income. It’s taxable.

The tax rate applicable for capital gains and income from crypto assets depends on whether you’re a professional trader, an occasional investor or a miner.

France’s Direction Générale des Finances Publiques (DGFiP) says that capital gains from the sale of crypto assets like bitcoins are currently taxed at the following rates:

Occasional investors – flat tax rate of 30 percent, made up of 12.8% income tax and 17.2% for social security contributions

Professional traders – BIC tax regime of 0-45 percent.

Crypto Miners – BNC tax regime of 0-45 percent.

The flat rate for occasional investors applies to individuals with financial investments in crypto assets, and other investment income like dividends and life insurance, not to professional traders. 

The DGFiP will only tax capital gains from crypto when crypto is converted into euros or any other fiat currency, if the total capital gain exceeds 305€ per year.

That means those who only dabble in crypto pay less than those who make their living from it.

The difference between an occasional investor and professional trader lies in how often you “dabble”. 

The more you play the crypto market, the more likely you are to be regarded as a professional trader – in which case the variable rate of 0 percent to 45 percent applies.

The point at which an occasional investor and professional trader isn’t obvious – that decision is made on a case-by-case basis – but the DGFiP’s working out on this calculation is based on the total investment amount, trade volumes, and how often you sell cryptocurrency. 

The more often you do this, the more likely you are to be considered a trader.

Mining, meanwhile, falls under the non-commercial profits regime of the general tax code. For more details, click on the government website, here.

As for declaring any crypto accounts you may have, there’s a special section on your annual French income tax declaration. Transfers into legal tender currency (but not another cryptocurrency), as well as purchases of goods or services using crypto, are taxable.

The overall amount of the capital gain (or loss) for the year must be entered in the annual income tax return, along with the details of the transactions

Fines for failure to declare a single bank account or investment scheme are hefty – from €1,500 to €10,000, with €3,000 being a fairly common penalty. These amounts are applied to each account you fail to declare.

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