It’s not just life, it’s PROVENCElife© PROVENCElife 2007 Tax changes August 2007
You may have noticed that France now has a new president and all eyes are upon him for his first acts as the country’s
new leader. Not wishing to fall at the first hurdle, Mr Sarkozy, who has hardly had time to warm the presidential throne, has
tabled his first changes in the form of the “Loi en Faveur du Travail, de l’Emploi et du pouvoir d’achat” more commonly
referred to as the “Fiscal Package”! The new law was adopted by Parliament 1st August, but, will not become law until the
definitive text is published in the “Journal Officiel”, which had not yet happened at the time of writing. There will then be a
“Décret d’Application”, which will give us more detail on how the measures will be applied. Many of these changes are not
of direct interest to the expatriate community, such as changes in overtime rules, but some will prove very interesting indeed,
such as making good his manifesto promise to “…suppress gift and inheritance tax for all but the richest…”, changes that
will affect the way you need to plan and the way, we at Siddalls, will advise our clients.The most interesting change is that
inheritance tax between spouses is to be completely abolished. This is a dramatic change from an allowance of just €76,000
between spouses and then taxation on a sliding scale of up to 40%. This, of course, brings France more into line with UK
inheritance law. However, the succession rules have not changed and succession issues remain for those with reserved
heirs, and action still needs to be taken to protect the surviving spouse from being beholden to the children, but it is certainly
a step in the right direction. Unmarried couples currently have serious issues with inheritance tax in France. Beneficiaries
must pay 60% on whatever they receive from a non-
(Pacte Civil de Solidarité) faired better, but not by much, with an allowance of just €57,000 with the remainder taxed at up
to 50%. The abolition of inheritance tax between spouses, under the new legislation, will be extended to those with a PACS
agreement, another dramatic change. Another change, you might argue, goes in the wrong direction, as the fairly new
€50,000 allowance for the estate that is divided between spouses and children, has been abolished. However, the
allowance for children has trebled from €50,000 to €150,000, so the inheritance tax position for immediate family has
certainly improved, but what about those who are not close family? Such is the generosity of the new law; other family
members will also be better off. Nephews and Nieces will now have an allowance of €5,000 each and there will also be an
allowance to siblings of €15,000 each. However, the current 60% tax rate payable by unrelated heirs, such as step-
or a “non-
interesting changes made to the law, concern wealth tax. The wealth tax allowance for the principal residence has been
raised from 20% to 30% and the tax shield known as the “bouclier fiscal” has been improved. Your total tax bills cannot
now be more than 50% of your taxable income instead of 60% and tax now includes the dreaded “contributions sociales”.
Tax relief on mortgage interest for the principal residence has been introduced.
This is just Mr Sarkozy’s opening shot in remodelling the financial landscape of France, but the extent of the new law
shows that he is determined to convert promises to actions, and that Parliament is unlikely to make major amendments to his
proposals.. These changes already mean new opportunities for French residents and it seems things will continue to change,
thus the need to have good financial advice becomes vital to make the most of them.
You may have noticed that France now has a new president and all eyes are upon him for his first acts as the country’s
new leader. Not wishing to fall at the first hurdle, Mr Sarkozy, who has hardly had time to warm the presidential throne, has
tabled his first changes in the form of the “Loi en Faveur du Travail, de l’Emploi et du pouvoir d’achat” more commonly
referred to as the “Fiscal Package”! The new law was adopted by Parliament 1st August, but, will not become law until the
definitive text is published in the “Journal Officiel”, which had not yet happened at the time of writing. There will then be a
“Décret d’Application”, which will give us more detail on how the measures will be applied. Many of these changes are not
of direct interest to the expatriate community, such as changes in overtime rules, but some will prove very interesting indeed,
such as making good his manifesto promise to “…suppress gift and inheritance tax for all but the richest…”, changes that
will affect the way you need to plan and the way, we at Siddalls, will advise our clients.The most interesting change is that
inheritance tax between spouses is to be completely abolished. This is a dramatic change from an allowance of just €76,000
between spouses and then taxation on a sliding scale of up to 40%. This, of course, brings France more into line with UK
inheritance law. However, the succession rules have not changed and succession issues remain for those with reserved
heirs, and action still needs to be taken to protect the surviving spouse from being beholden to the children, but it is certainly
a step in the right direction. Unmarried couples currently have serious issues with inheritance tax in France. Beneficiaries
must pay 60% on whatever they receive from a non-
(Pacte Civil de Solidarité) faired better, but not by much, with an allowance of just €57,000 with the remainder taxed at up
to 50%. The abolition of inheritance tax between spouses, under the new legislation, will be extended to those with a PACS
agreement, another dramatic change. Another change, you might argue, goes in the wrong direction, as the fairly new
€50,000 allowance for the estate that is divided between spouses and children, has been abolished. However, the
allowance for children has trebled from €50,000 to €150,000, so the inheritance tax position for immediate family has
certainly improved, but what about those who are not close family? Such is the generosity of the new law; other family
members will also be better off. Nephews and Nieces will now have an allowance of €5,000 each and there will also be an
allowance to siblings of €15,000 each. However, the current 60% tax rate payable by unrelated heirs, such as step-
or a “non-
interesting changes made to the law, concern wealth tax. The wealth tax allowance for the principal residence has been
raised from 20% to 30% and the tax shield known as the “bouclier fiscal” has been improved. Your total tax bills cannot
now be more than 50% of your taxable income instead of 60% and tax now includes the dreaded “contributions sociales”.
Tax relief on mortgage interest for the principal residence has been introduced.
This is just Mr Sarkozy’s opening shot in remodelling the financial landscape of France, but the extent of the new law
shows that he is determined to convert promises to actions, and that Parliament is unlikely to make major amendments to his
proposals.. These changes already mean new opportunities for French residents and it seems things will continue to change,
thus the need to have good financial advice becomes vital to make the most of them.