Capital gains on UK investments
I would like to know how capital gains on UK investments are assessed and treated in France for tax? I live in France. P.M.
The system was unfortunately made more complicated in 2013, and has since worsened, making the choice of best options complex.
Essentially, to compute the capital gain, it is the difference between, on one hand, the sale price and the sale charges and, on the other hand, the purchase cost and the purchase charges.
The gains are taxed by adding them to the income, so are effectively taxed as income under the income tax system. There are two options:
1: Either a flat rate system, which is now standard, which is income tax at 12.8% and the social charges at 17.2%, so a total of 30% on the net gain; or
2: The normal income tax band system which taxes the net gain for income tax and social charges, each separately. Under this system, there can be, for income tax only, an abatement option for the duration of holding of the shares, but only for shares acquired before 2018. In which case...
– Shares held more than two years but less than eight years: 50% abatement of the gain;
– Shares held for more than eight years: 65% abatement of the gain.
The standard option is the flat tax rate but in this case the forfeit (fixed) rate also applies to investment income. It cannot be applied only to the capital gains.
As mentioned at the end of the answer to the first question here, there is an option to elect for the ordinary tax bands/rates for taxation of the gains, which then gives the right to the abatements for capital gains and also the 40% abatement for the dividends.
Working out if, overall, the forfeit rate or the income tax bands system is better can be un casse-tête chinois (a real brain teaser).
Reader's query answered by Hugh MacDonald
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