France - Tax proposals expected to be enacted July-August 2012 

The pending tax proposals include measures that would limit or eliminate loss carryforwards in certain situations, the deduction of waivers with respect to “financial” debt, and certain tax beneficial aspects of capital increases.

The proposals also include anti-avoidance measures, intended to supplement earlier provisions, and would focus on “shell divestment schemes.”

Among other tax proposals are:

• 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
• Acceleration of the payment date for a temporary corporate income tax surcharge installment remittance
• Repeal of the scheduled October 2012 increase of standard VAT rate to 21.2%, thereby returning the VAT rate to 19.6%

Concerning individual taxpayers, the tax legislation 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 on €1.3 million at a rate ranging from 0.55% to 1.8%
• 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)

Read a July 2012 report [PDF 213 KB] prepared by Fidal* in France: First Tax Measures of the New Government

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