French Tax End of Year Summary - December 2012

An overview of the French tax laws as of December 2012

** BDO and PKF merger **

Since this article was written, PKF and BDO companies have merged, effective from 10 April 2013. The French tax team remains unchanged and now operates within the BDO Guernsey office. It is apparent already that this merger offers great opportunities to extend the ranges of services and assistance they can offer to their clients.

New contact details:

Tel: +44 1481 724561
Fax: +44 1481 711657
Website: - click on French Tax

The original article follows:

New French tax laws have caused confusion

The past couple of years have seen acceleration in the production of new tax laws and edicts often leaving little time for tax practitioners and taxpayers to absorb the changes. It has been increasingly difficult to navigate through what seems to be a bombardment of new measures destined to find every possible taxable source in order to fund and replenish the State's coffers.

France is not currently alone in the practice but everyone will agree that the delays between the entry into force of new French tax laws and the release of any relevant guidelines for taxpayers has resulted in confusion and dismay.

Set out below is a year-end "state of play" summary which unfortunately, given the situation described above, largely reflects tax issues that remain unconfirmed rather than a solid year-end planning checklist.

Another Loi de Finance Rectificative for 2012

A third "projet de loi de finances rectificative" for 2012 is currently being debated and may be voted in the next few weeks. Luckily we are getting too close to the end of the year to see yet another amending law text after this one.

The following proposals are relevant to taxpayers:

i) The base cost to calculate the taxable gain on shares sold within two years of being transferred by a lifetime gift would be deemed to be the original price of shares gifted by the donor increased by the gift tax or, the value at the date of the gift, if it is lower.

ii) From 1st January 2013 the French tax authorities (FTA) would be able to request evidence of origin of funds if a taxpayer's bank balance is in excess of double the amount of his taxable income, or if it exceeds taxable income by 200,000 Euros.

iii) From 1st January 2013, the FTA would be able to levy the highest tariff of death duty i.e. 60% on assets held on previously undeclared non-French accounts or life assurance policies "hidden" outside France if the taxpayer cannot provide suitable evidence to explain the origin of those funds.

iv) French residents have an obligation to report any bank account or life assurance policies held directly of indirectly outside France. From 1st January 2013 the FTA would be able to request information on such holdings from third parties.

v) French companies who transfer their registered office to another EU Member State would incur an immediate taxation of any uncrystallised gains but there should be an option to have this taxation spread over five years. This has already been challenged by the European Court of Justice and is therefore likely to be replaced by a choice between an immediate taxation of the gain or later upon the crystallisation of the gain and subject to regular reporting conditions.

Social charges incurred by non-French residents

This refers to the application of social surcharges (CSG, CRDS and PS at 15.5%) to furnished rental property in France owned by non-French residents. Given the continuing conflicting views on this specific issue, we have resumed further research. The French social security code refers to income taxable under Article 164 B of the French Tax Code being subjected to the extra charges. This article refers to "revenus immobiliers" which traditionally relates to unfurnished rentals also labelled as "revenus fonciers" for the purpose of income tax assessment rules. The use of the more general term "revenus immobiliers", literally income from immovable assets, creates the uncertainty and strictly this term does not make any distinction between furnished and unfurnished rentals.

However, furnished rentals are treated as commercial activities and Article 164B does not relate to this type of rental. The Article of the French tax code which deals with the "bénéfices industriels et commerciaux (BIC)" is not referred to as being subject to the new rules in the Social Security Code. In our view, the position therefore remains unconfirmed until such time as the authorities issue an "Instruction". The latter may not even shed any light on the matter and taxpayers will have to exercise caution when completing their 2012 income tax returns due by the end of June or middle of July, depending on their residence.

Capital Gains Tax on the sale of French property

The 2013 Budget proposes to review the taxation of gains on the sale of property. The initial proposal, which was aiming to apply the barème rates plus extra 15.5%, did not specify whether the change would concern French residents only.

Nevertheless, it now seems that this will be abandoned in favour of an extra charge (on top of the existing rates) set at 2% for the first 50,000 Euros and increased by 1% per 50,000 Euros "tranche" up to a total of 6% for gains in excess of 250,000 Euros.

Regrettably, the uncertain legal climate has affected property sales by both residents and non-residents.

French Trust Legislation

i) There has been much debate following the publication of the "Instruction" on whether or not the trust tax charge of 0.5% set to increase to 1.5% from 1st January 2013, may be paid instead of the wealth tax charge in certain situations.

ii) It would appear in fact that this charge is designed to apply as a sanction against the non-payment of wealth tax which means that, in some cases, it may not preclude the French tax authorities from seeking the levy of the French wealth tax at the level of the French resident or non-resident taxable party.

iii) It remains to be seen whether the taxable party may then claim relief in respect of any charge already paid at trust level but this seems unlikely.

iv) Until further clarification is reached it is advisable for trustees to refrain whenever possible, from volunteering any payment especially in situations when they have not been able to verify the exposure of the taxable trust party to wealth tax and the effective payment of the liability. Each case must be considered on its own merits.

v) The filing deadline for one-off trustee reports in respect of trusts caught under the new French tax measures is now fast approaching as it is set at 31st December 2012. Trustees who feel that they have entities which may be affected should take urgent advice and consider the implications of the reporting with their clients as this may have an effect on their personal French tax affairs.

vi) Most concerning perhaps are those trust situation which may be treated by the FTA as having been set up to hide life policies or foreign accounts especially in the context of the cocktail of new anti tax evasion proposed in the third round of amending laws as outlined above.

vii) Individuals (settlors or beneficiaries) in the situations described above will need to consider their position very carefully and establish:

a) If the trustees have filed any declaration (it is a legal requirement so they should not have had a choice in the matter)
b) What has been reported
c) Whether the nature of the trust asset could be deemed to be hidden life policies or non-French accounts
d) Consider the impact of including the trust assets to their personal wealth for wealth tax and estate planning purposes.

About the author

This article was provided by PKF (Channel Islands) Limited. For further information, assistance with the preparation of French tax returns or specific advice on the French tax implications of a permanent move to France or French property purchase and structuring, please contact Virginie Deflassieux or Catherine Le Pelley at, or telephone +44 1481 727927. Alternatively visit their website


This document has been prepared as a general guide. It is not a substitute for professional advice. Neither PKF (Channel Islands) Limited nor its directors or employees accept any responsibility for loss or damage incurred as a result of acting or refraining to act upon anything contained in or omitted from this document. PKF (Channel Islands) Limited is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.


Further information on French tax can be found on our site using this link:

Moving to France

Please note that information given in the articles found here may supersede the relevant sections above.

Additional articles which may be of interest:

French Tax Budget for 2013
French Trust Laws and French Tax - November 2012
French Tax Changes in July 2012
Capital Gains Tax in France on Property
Tax in France
French Wealth Tax
Inheritance Tax in France and the Assurance Vie or PCP (Private Client Portfolio Bond)
French Tax Changes in 2011
Holiday Homes in France - how to avoid Capital Gains Tax when you want to sell

Do you know this subject better than we do? Do you have photos relating to this subject?

If you have photos or information that you'd like to add to this page (or if you've spotted something we've got wrong) then please enter your comments and/or select your photos and click "Send". (If you're sending photos please don't forget to mention the location!):

 Loading UploadThingy file upload form...

If your upload form doesn't display within a few seconds, please check the FAQ or contact us at We'd love to help out!

Featured Properties

Featured Links

Chalets and apartments for sale in Morzine

Montriond property for sale

Ski chalets for sale

French properties to move in and add value

Have Your Say