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2012: Higher taxes for higher earners

Published Date | Written by David Franks |

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2012: Higher taxes for higher earners

By David Franks

We already saw a number of tax reforms in 2011 and now those debated by parliament towards the end of the year have come into effect.

The fixed tax rate applied to interest and dividends has increased from 19% to 24% from January this year. You now lose 37.5% of your interest earnings to tax as they are also subject to 13.5% social charges.

This measure is targeted at higher earners since you have a choice of whether to pay tax at this fixed rate or at the normal scale rates of income tax. If your income tax rate is lower than 24% you would not opt for the fixed tax rate.

When it comes to income tax, the “exceptional contribution” for higher earners is confirmed and applies to income received in 2011 (so tax payable this year) and 2012. High earners now pay an extra 3% tax on any income between €250,000 and €500,000, and 4% on income over €500,000. For married and PACS couples the thresholds are €500,000 and €1 million. There are specific calculations to help reduce the impact of exceptional income in one year (e.g. capital gains on the sale of a property).

There was no adjustment for the income tax bands for income earned in 2011 so they remain the same as 2010. The ceilings, limits and allowances usually indexed in line with inflation are unchanged from 2010. Taxpayers are expected to pay more tax this year as result.

Income tax scale rates of tax for 2011 (tax payable in 2012)

Up to €5,963: 0 %

From €5,963 - €11 896: 5.5 %

From €11,896 to €26,420: 14 %

From €26,420 to €70,830: 30 %

From €70,830 to €250,000: 41 %

From €250,000 to €500,000: 44%*

Over €500,000: 45%*

*These last two tax bands are when the 3% and 4% surcharges are added in.

Don’t forget you also need to pay social charges, which are 8% on salaries, 7.1% on applicable pension payments and 13.5% on investment income, although a portion of these charges may be deductible for income tax purposes.

Wealth and succession tax rates and allowances have also been frozen.

Investors have lost the general capital gains tax deduction and exemption on the sale of shares held for more than six and eight years respectively. The tax can instead be deferred if certain restrictive conditions are met.

In spite of all the recent tax changes it is still often possible to use approved arrangements to lower your tax liabilities in France. For example, assurance vie policies remain a tax efficient vehicle for French residents’ capital.

Contact your local Blevins Franks Partner, Mary Taylor, for advice on your situation.

Mary Taylor TEL 05 62 30 51 40 EMAIL This email address is being protected from spambots. You need JavaScript enabled to view it.

Mary is holding seminars in Pau on 1^st March and Carcassonne on 2^nd March. The seminar will focus on the French tax increases to date, the potential direction of tax legislation in France, and tax saving strategies to protect your wealth and UK pensions from tax. Contact Mary for more information and to reserve your place, or click here to book online.

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.

For more information on the tax reforms and on the opportunities available to shelter your income and assets from tax in France, contact your local Blevins Franks Partner, Mary Taylor.

05 62 30 51 40 or This email address is being protected from spambots. You need JavaScript enabled to view it.

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