France - Parliament passes tax legislation; final publication is pending 

The amended finance act had been pending consideration of the French Parliament since the beginning of July. It was approved on 31 July—but with some changes from the initial draft legislation submitted by the government (see the background summary discussion provided below).

Publication of the new law is expected by 9 August 2012.

Effective dates

Certain provisions in the law will have different effective dates. For instance:

• The 3% tax / levy on dividend distributions applies for distributions made as from the date of the law’s publication (again, expected to be 9 August 2012).
• The increased 0.2% rate of the financial transaction tax has an effective date of 1 August 2012.
• The enhanced taxation of stock options and “free shares” applies for options / shares granted on or after 11 July 2012.
• The new rules on loss carryforwards, on restrictions on the deductibility of debt waivers, and on “shell” divestment plans apply for fiscal years ending on or after 4 July 2012.
• The deduction limitation for certain short-term capital losses applies with respect to contributions realized as from 19 July 2012.

Read an August 2012 report [PDF 221 KB] prepared by Fidal*: First tax measures or the new government: Final adoption of the 2nd amended finance act for 2012)

Background

In early July 2012, the newly elected French government proposed the tax law changes that would affect businesses:

• The creation of a 3% tax levy on dividend distributions (including constructive dividends)
• An increase in the rate of the financial transactions tax, from 0.1% to 0.2%
• An increase in the rates of social security contributions applicable to stock options and “free shares”
• An increase in the lump-sum social contribution on profit- sharing payments
• Repeal of a deduction available for companies that pay profit -sharing bonuses above the statutory requirements
• Limits on tax loss carryforwards
• Limits on the deductibility of waivers for debt qualified as “financial”
• Restrictions on the deduction of certain short-term capital losses
• Change to the rules with respect to transfers of profits to “low tax” jurisdictions
• A temporary 4% tax on petroleum product stocks
• An increase in the rate of the bank systemic risk tax rate
• A 5% tax on share disposals of audiovisual communication service providers
• Acceleration of the payment date for a temporary corporate income tax surcharge installment remittance
• Repeal of the scheduled October 2012 increase of standard value added tax (VAT) rate to 21.2%, thereby returning the VAT rate to 19.6%

Concerning individual taxpayers, the tax proposals would impose:

• With respect to real estate capital gains realized by non- French tax residents, a social security change (currently at a rate of 15.5%)
• A wealth tax surcharge for taxpayers whose net wealth exceeds €1.3 million (thereby reversing a reduction in the wealth tax rate as adopted by the preceding government, to apply to the portion of wealth exceeding €0.8 million)
• With respect to gift and inheritance taxes, a reduced fixed deduction of €100,000 (instead of the current €160,000) over a 15 -year period (instead of the current 10-year period)

In late July 2012, the lower house (Assemblée Nationale) adopted changes concerning (1) the proposed 3% tax on dividend distributions, and (2) the proposed changes to the treatment of gain/loss with respect to a capital contributions. See TaxNewsFlash-Europe: France - Changes to 3% dividends tax, capital contribution proposals

* FIDAL is an independent legal entity that is separate from KPMG International and its member firms.