PEOPLE whose total fortunes are less than €1.3m will escape paying wealth tax from this year, the government has said.
The change will be a relief to about 300,000 people who pay Impôt de Solidarité sur la Fortune (ISF) largely due to the rising value of their house.
It will also save about 200,000 who were “about to” become ISF payers in the next few years, the government says.
However the reforms announced by Budget Minister François Baroin fall short of claims by President Nicolas Sarkozy that he would abolish the tax. France has been the only EU country to levy a wealth tax for several years.
According to Mr Baroin, at least one part of his fiscal reform law (expected to be voted on by parliament in June) is likely to apply as of this year’s declaration and payment of Impôt sur la Fortune (ISF): exonerating those with wealth falling into the current first band of €800,000 - €1,310,000.
The law is unlikely to be passed in time for ISF declarations on June 15, so these may be pushed to September 15 (a decision due to be taken in May).
Other parts of the law, likely to be in place by 2012, include abolishing the six ISF bands and
applying a single rate to a person’s wealth, from the first euro: 0.25% if you own up to €3 million and 0.5% if you own more.
The “poorest” ISF payers (who will pay no tax) do the best out of the reform, but otherwise those who benefit most are the super-rich, who have a lower rate applied to most of their wealth.
Those whose wealth falls only just into the second band will pay more, a problem the government has said it will try to resolve. This is likely to involve a progressive rise in the tax rate from 0-0.25% for those with €1.3-1.5million.
Examples:
- Wealth of €1,350,000 - tax now: €3,105, under reform: €3,375
- Wealth of €2 million - now: €7,980, reform: €5,000
- Wealth of €10 million - now: €112,450, reform: €50,000
- €1 billion - now: €17,697, 780, reform: €5 million
Other plans include:
- From 2012 people paying lower rate ISF will declare their wealth on the income tax form
rather than making a separate declaration.
- The tax shield, the bouclier fiscal, which refunds all taxes paid in a given year above 50% of the value of income for the year, will be abolished (possibly from this year). However this will not, presumably, halt applications, based on 2009 income, available this year until December 31.
- The ISF plafonnement, a mechanism to limit the amount of the ISF calculation itself, will also be abolished. This would limit 2011’s ISF and income tax paid in 2011 on 2010 income to 85% of 2010 income.
- Tax on large inheritances will be raised to plug a €900m gap left by other reforms. Tax on the second-to-last band (€0.9-1.8m) will go from 35% to 40% per heir and on the last one (above €1.8m) from 40% to 45%.
- The renewal period for lifetime gifts, which includes a €156,975 tax allowance for direct heirs, will be extended to 10, from six, years.
Only 3.5% of ISF payers benefited from the bouclier (and only 0.2% of those in the first band) so it is thought most ISF-payers will come out winners from the reform. This is especially the case for high band taxpayers who also have very high incomes so did not benefit from the bouclier.
However there will be some losers among those with relatively low incomes but large amounts of capital.
A NEW “exit tax” will be created “from this year”, according to the government. It will apply to those who leave France then sell shares from abroad (eg. someone who moves to Belgium, then sells their French-based firm). The government has yet to release details.
