On 11 May, the French Government introduced before the National Assembly an Amending Finance Bill (n°3046) for 2011 (the Bill) that proposes a significant reform of taxes on wealth and estates. Pursuant to the Bill, the tax shield mechanism would be abolished, the wealth tax revised, the inheritance and gift duties increased, and a new tax on secondary residences for nonresidents established.
Below are summarized the main provisions of the Bill.
1. Abolition of the Tax Shield (Article 13 of the Bill)
The provision contained in Article 1 of the French Tax Code that caps the amount of direct taxes due by a taxpayer at 50% of his or her income would be abolished. This would come into force with respect to direct taxes to be paid in 2011 and 2012 on income earned in 2011.
2. Nonresidents; International Mobility
Exclusion of debts contracted by real estate investment companies with their nonresident shareholders for the calculation of wealth tax (Article 16 of the Bill)
The government is considering putting an end to the mechanism whereby nonresidents purchase immovable property in France through special-purpose companies which they fund with debt in order to avoid wealth tax. This scheme has allowed the reduction of the wealth tax base of nonresidents since, on the one hand, shares of companies are valued with their indebtedness deducted, and on the other hand, the corresponding shareholder claims are exempt as investments made in France by nonresidents pursuant to Article 885 L of the French Tax Code.
Please see full article below for more information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.