France: Amended Finance Act for 2012 – Main measures

Julien Monsenego, Tax Partner, Olswang

Law n°2012-1510 dated 29 December 2012 published in the official Journal

Measure ruled unconstitutional: measure amending the mechanism of gift and sale of shares (“donations-cessions de titres”)

Individuals

Introduction of a new tax on real estate capital gains

A new tax on real estate capital gains is applicable for capital gains exceeding 50,000 Euros.  Real estate capital gains are subject to a progressive scale ranging from 2% to 6% depending on the capital gains amount. This measure is applicable as from 1 January 2013.

New tax deferral on contribution of shares

A new specific mechanism of tax deferral is implemented for contributions of shares made to a recipient company controlled by the contributor.  The tax deferral notably ends with the sale (1) by the contributor of the shares received in consideration of the contribution, or (2) with the sale by the company, within a three-year period after the contribution, of the shares contributed unless it reinvests at least 50% of the sale proceeds in an economic activity within a two-year period.  This mechanism is applicable to contributions carried out as from 14 November 2012.

Taxation of temporary sale of usufruct

The temporary sale of usufruct is not taxed as a capital gain but as an income in the category corresponding to the income attached to the rights sold.  This measure applies to disposals made on or after 14 November 2012.

Companies

Introduction of a new tax credit for competitiveness and employment (CICE)

Companies can benefit from a tax credit based on wages which do not exceed two and a half times the minimum guaranteed wage (SMIC) to their employees.  This tax credit is offset against the corporate income tax.  The exceeding portion is carried forward over the next three years and can be refunded after this period.  For wages paid in 2013, the tax credit rate is 4%.  The tax credit rate is 6% for wages paid as from 1 January 2014.

Cross-border transfer of head-office or permanent establishment

In order to adapt French tax law to ECJ case law, the taxation rules of latent capital gains on assets at the occasion of a transfer of a French head office or permanent establishment to another state of the EU or the EEA have been modified.  For transfers carried out as from 14 November 2012 a choice is made available to the tax payer: immediate taxation or taxation spread over a 5 year-period.  That latter taxation notably ends, and the tax on the capital gain is immediately due, if the sale of the assets occurs within those 5 years.  It remains to be seen whether this measure complies with EU law requirements.

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