Taxation of capital gains on the sale of shares
According to the 29 April 2013 announcement, two regimes would co-exist:
- An ordinary tax regime
- An incentive tax regime
Under both regimes, capital gains would be taxed under the progressive individual income tax rate schedules, but “tax allowances”—which in general depend on the shares’ holding period—would be increased.
These regimes are briefly described below.
Capital gains under the proposed ordinary tax regime would be taxed under the progressive individual income tax rate schedules, after applying a “tax allowance” of:
- 50% when the shares have been held between two and eight years
- 65% when the shares have been held eight years or longer
The incentive tax regime would apply:
- With respect to capital gains on the sale of shares of small and medium-sized companies established for a period of less than 10 years
- With respect to capital gains on the sale of shares that currently are tax-exempt—i.e., capital gains realized on retirement/withdrawal of a person with certain managerial responsibilities, or realized on transfers made between family members
For capital gains realized from these transfers, the “tax allowance” would be increased to:
- 50% when the shares have been held between one and four years
- 65% when the shares have been held between four and eight years
- 85% when the shares have been held for eight years or more
Moreover, an additional tax allowance of €500,000 would apply to reduce the amount of taxable capital gains on the sale of shares realized by a person with certain managerial responsibilities of small companies, at retirement.
Changes in the PEA tax regime
The Plan d’épargne en actions (PEA) is a program that allows taxpayers to invest in equities while benefiting from a tax exemption on dividends and capital gains with respect to equities maintained by the plan, provided no withdrawals are made within a five-year period.
Under the proposal:
- The payment ceiling (cash) would be increased from €132,000 to €150,000.
- Additional payments concerning the acquisition of shares in small and medium-sized companies would be authorized up to a ceiling limit of €75,000.
For more information, contact a tax professional at Fidal Direction Internationale* in Paris or the KPMG French Tax Center in New York:
Gilles Galinier-Warrain, French Tax Center, KPMG LLP, New York
Olivier Ferrari, Tax Partner
+33 (0)1 55 68 14 76
Patrick Seroin, Tax Partner
+33 (0)1 55 68 15 93
* Fidal Direction International is a French law firm that is independent from KPMG and its member firms.