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FINANCE LAW FOR 2005
The
annual Finance Law has now been published. Some of the major changes of
consequence for French property purchasers are outlined as follows:
Income
tax
The income tax bands applicable to income earned in 2004 have been altered
as follows:
0% up to 4,334 Euros (formerly 4,262 Euros)
6.83% between 4,334 Euros and 8,524 Euros (formerly 8,382 Euros)
19.14% between 8,524 and 15,004 Euros (formerly 14,753 Euros)
28.26% between 15,004 Euros and 24,294 Euros (formerly 23,888 Euros)
37.38% between 24,294 Euros and 39,529 Euros (formerly 38,868 Euros)
42.62% between 39,529 Euros and 48,747 Euros (formerly 47,932 Euros)
48.09% over 48,747 Euros (formerly 47,932 Euros)
As previously, the above bands are applicable to the net taxable income
following deduction of allowable expenditure, relief and allowances
depending upon the nature of the income earned and personal family
circumstances.
PACS
A PACS is an agreement between unmarried people governing the ownership of
their assets. When the PACS was introduced, a number of tax advantages
were likewise brought in e.g. additional personal allowance, possibility
of joint declaration, special inheritance and gift tax free band and
rates.
The
former requirement that the PACS had to reach its third anniversary before
the partners could benefit from tax advantages has been removed by the
Finance Law for 2005. The tax advantages are applicable immediately. If
the agreement is terminated for reasons other than marriage or the death
of a partner during the year of its conclusion or the subsequent year, the
advantages are retrospectively lifted.
Inheritance
tax
A tax free band of 50,000 Euros has been introduced applicable to the net
value of the inheritance received either by the living or represented
(e.g. where grandchildren have inherited in the place of a deceased
parent) children or ascendants of the deceased and the surviving spouse or
exclusively by the surviving spouse. Taking an overly simplified example,
this means that in the situation where there is a spouse and two children
who have inherited 1/3rd each and the value of the inheritance totals
150,000 Euros, the taxation position will be as follows:
150,000 Euros - 50,000 Euros tax free = 100,000 Euros
100,000 Euros ÷ 3 = 33,333 Euros each which will be covered by the tax
free bands applicable to a spouse and children thus no inheritance tax to
pay.
Previously, the position would have been as follows: 150,000 Euros ÷ 3 =
50,000 Euros each. The spouse would have been covered by his or her tax
free band of 76,000 Euros but the children would have paid a small amount
of tax as they would not quite have been covered by their tax free band of
46,000 Euros each.
Therefore,
there is a perceptible benefit resulting from the new provisions.
The
tax free band of children inheriting from parents, grand-children
inheriting from grand-parents if the parents are no longer alive or
parents inheriting from children has been altered from 46,000 Euros to
50,000 Euros.
Television
licence
The television licence has been replaced by a tax ('redevance
audiovisuelle') collected as part of the occupancy tax ('taxe d'habitation').
For mainland France, it amounts to 116 Euros and is due by those persons
who on the 1st January hold a television set in a premises situated in
France. The amount does not alter by function of the number of sets in the
household for which the occupancy tax is paid.
10/01/2005
- Legal
update
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