Legal news

1. The principe

According to article 167 bis of the French tax code (CGI), the transfer of a tax residence outside France results in the immediate imposition of income tax and social security contributions on unrealised capital gains on corporate rights, securities or rights, on claims arising from an earn-out clause and on deferred capital gains.

However, this system allows for the possibility of deferring payment and, under certain circumstances, to obtain a refund or reduction of tax.
The law sets the taxable event as the day before the taxpayer ceases to have unlimited tax liability in France.

2. The people affected

These are taxpayers who:

– have been tax resident in France for at least 6 of the 10 years preceding the transfer of their tax residence abroad;
– own, directly or indirectly with members of their tax household, corporate rights, securities or rights :
– representing at least 50% of a company’s profits on the date of the transfer of residence ;
– or have a total value of more than 800,000 euros on the same date.

All taxpayers, regardless of how long they have been resident in France, who transfer their tax residence outside France are subject to taxation on their capital gains placed under deferred taxation at the time of this transfer.

Furthermore, these deferred capital gains are taxable without any limitation in proportion to the percentage or value of the participation in the profits of the company concerned.

3. Affected securities and receivables

These are the corporate rights, securities, titles or rights mentioned in 1 i I of article 150-0 A of the CGI, i.e. in particular:

– transferable securities, corporate rights, bonds, etc;
– rights related to these securities, rights or titles such as usufruct or mere ownership;
– securities representing the same securities or rights, such as UCIs;
– claims for premiums;
– securities to which a tax deferral is attached.

4. Exempt securities

However, this does not apply to shares in a PEA, carried interest shares, shares in employee savings schemes or shares in companies or associations covered by articles 8 to 8b of the General Tax Code that are predominantly real estate in nature.

For transfers of tax residence outside France occurring after 1 January 2019, the exit tax regime explicitly applies to unrealised capital gains on shares in companies with a predominance of real estate assets subject to corporate income tax in accordance with the provisions of Article VIII, 4 of Article 167 bis of the CGI.

5. Tax base

Unrealised capital gains are determined by the difference between:

– the value of the securities at the date of transfer of tax residence outside France;

– For unlisted securities, this is the taxpayer’s detailed and estimated declaration of value, and for listed securities, it is the last known price on the date of transfer of residence or the average of the last 30 prices prior to this date;

– and their purchase price or value used to determine the free transfer tax;

– In the case of securities subject to a tax deferral (art. 150-0 B CGI), the acquisition price or value of the securities offered in exchange is used, minus the amount of the equalisation payment received which was not subject to tax for the year of the exchange, or plus the equalisation payment made at the time of this exchange (art. 167 bis, I, 2 CGI).

6. Receivables from price surcharges

They are valued at their actual value at the date of transfer of tax residence outside France.

In the case of deferred capital gains, the valuation basis is the capital gain calculated and placed on deferred taxation for the year of disposal.

7. Unrealised capital gains

They can be reduced by:

– the standard deduction when the capital gain is taxed at the standard rate;

In addition to the conditions for applying the fixed deduction:

– the taxpayer must have retired before moving his or her tax residence;

– taxpayers with tax residence outside of France must sell the shares in question within 2 years of retirement.

– the fixed deduction or, if the unrealised capital gain relates to shares acquired or subscribed before 1 January 2018, the deduction for the time the taxpayer held the shares under ordinary law or the increased deduction if the taxpayer has opted for taxation under the tax scale (art. 167 bis, II bis, 1 CGI).

As a reminder, the fixed deduction cannot be combined with the deduction for ownership time.

Unrealised capital gains cannot be offset against unrealised capital losses calculated at the date of the change of residence (as these are not established, they cannot be offset), or against capital losses realised between 1 January of the year of the change of tax residence outside France and the date of this change, or against capital losses realised in previous years that are still carried forward.

Note :

The capital losses carried forward and the losses realised between 1 January of the year in which the tax residence outside France is transferred and the date of this transfer may be offset under the general conditions against the capital gains whose deferral of taxation ceases at the time of the transfer of the tax residence outside France.

8. Operational event

The taxable event is the transfer of the taxpayer’s tax residence outside France, which is deemed to occur on the day preceding the day on which the taxpayer ceases to be liable to tax in France in respect of all its income.

9. Tax rates

Unrealised capital gains (established claims or deferred capital gains) are subject to a flat rate of 12.8%.

However, if the taxpayer has elected to be taxed at the progressive income tax rate on all his capital gains and capital gains registered in the year of departure, the tax on taxable capital gains and receivables is determined by the difference between:

– the amount of tax resulting from the application of the progressive scale to the sum of income from French and foreign sources and capital gains and receivables taxable under the exit tax;

– and the amount of tax resulting from the application of the scale to income from French and foreign sources only.

The tax rate is equal to the ratio between, on the one hand, the tax calculated according to the above conditions and, on the other hand, the sum of the capital gains and receivables subject to the exit tax.

Capital gains and receivables are also subject to social security contributions at the rate applicable at the time of the transfer of tax residence outside France.

However, the exceptional contribution for high incomes (CEHR) is not payable.

The social security contribution (PS) rate is set at 17.2%, with no possibility to deduct part of the CSG.

Important :

Capital gains on transfers covered by the tax deferral scheme provided for in Article 150-0 B ter of the CGI are taxed at their own rate (Article 167 bis, II bis, 1 bis CGI) set out in Article 200 A, 2 ter of the CGI.

10. Conditions for applying a payment deferral

When a taxpayer moves his/her tax residence outside France, the tax is in principle due immediately. However, the taxpayer can benefit from a deferral of payment (for income tax and social security contributions):

– automatically and without the need to provide any guarantees when the taxpayer’s tax residence is transferred to an EU Member State or to another state or territory that has signed an administrative assistance agreement with France to combat tax fraud and tax evasion and an agreement on mutual assistance for the recovery of debts with a scope equivalent to that provided for in Council Directive 2010/24/EU of 16 March 2010 and which is not an NFCT within the meaning of Article 238-0 A of the CGI;

– on request if the taxpayer moves his tax residence to a state or territory other than those for which the deferral is automatic, i.e. an NCCT or a state that has not signed an administrative assistance agreement or a collection assistance agreement with France; in this case, the taxpayer must declare his capital gains and receivables, appoint a tax representative and provide guarantees before moving his residence outside France.

– The amount of the guarantee is equal to 12.8 per cent of the gross amount of the capital gains and receivables (no deduction is applied), except in the case of capital gains from contributions placed under the tax deferral regime of article 150-0 B ter of the CGI, where the amount of the guarantee is determined by applying the tax rate applicable to them (article 167 bis, V, 1 CGI).

The postponement suspends the limitation period for the recovery proceedings until the date of the event leading to its expiry.

Reasons for the expiry of the suspension of payments:

for unrealised capital gains, the occurrence of one of the following events:

– the disposal of securities (sale, deposit, exchange), with the exception of exchange transactions benefiting from the tax deferral provided for in Article 150-0 B of the CGI or deposit transactions covered by Article 150-0 B ter of the CGI;

– repurchase of own shares by a company;

– redemption of bonds and similar securities;

– cancellation of securities;

– gifts of securities where the taxpayer is a resident of a non-EEA state or Liechtenstein, unless the donor demonstrates that the main purpose of the gift is not to evade tax;

for receivables, the occurrence of one of the following events:

– receipt of an earn-out ;

– contribution or assignment of the receivable as a result of an earn-out clause; or

– donation of the receivable under the same conditions as described above;

for capital gains tax deferred at the date of change of residence, the occurrence of one of the events leading to the expiry of the relevant tax deferral.

Please note the following :

The automatic deferral from which a taxpayer has benefited will expire in the event of a new transfer of his residence to a state that is not eligible for this measure.

However, 90 days before the move, the taxpayer can make an express request for deferral under the conditions listed above.

11. Taxation of capital gains

The final taxation of the capital gain involves an adjustment of the tax determined at the time of the transfer of residence to take into account:

– the capital gain on the sale is less than the amount of the deferred unrealised capital gain;

The tax payable is limited to the amount of tax calculated on the actual capital gain on the sale, repurchase, redemption or cancellation or the increase in value of the securities.
The excess amount is automatically cancelled or refunded.

– any taxation of the capital gains realised by the taxpayer in respect of the year of departure at the progressive tax rate (V. no. 11 ); in this case, the taxpayer may, when the first reason for expiry of the deferral occurs, request that the progressive tax rate be applied to all capital gains and receivables covered by the exit tax (CGI, art. 167 bis, VIII bis), which allows the actual length of time the shares have been held to be taken into account when determining the applicable allowance rate;

– the realisation of a capital loss or the existence of deferred capital losses at the date of expiry of the deferral;

– In accordance with the case law of the Conseil d’Etat (CE, 12 Nov. 2015, no. 390265: Dr. fisc. 2016, no. 6, comm. 155),

– the allowances for length of ownership are no longer applicable to chargeable capital losses (art. 167 bis, VIII, 4 bis CGI).

– the realisation of a substantial capital gain on a holding (art. 244 bis B CGI).

Exit tax is automatically waived.

– the realisation of a capital gain taxed in France in accordance with the provisions of article 244 bis A of the CGI (art. 167 bis, VIII, 4 CGI);

– Exit tax and social security contributions relating to the unrealised capital gain are deducted or, if they were paid when the tax residence was transferred, refunded. This mainly concerns capital gains on shares in property companies that are subject to corporation tax.

– any tax paid by the taxpayer in his State of residence.

Remark :

The tax can also be recalculated when the exit tax has actually been paid at the time of departure from France and one of the events leading to the expiry of the deferral occurs.

12. Tax relief or refund

The taxpayer can get either a refund if the tax has been deferred or a repayment of the tax if it has been paid earlier in the following situations
expiry of a period of:

– 2 years after the change of residence;

– or 5 years if the total value of the securities and rights subject to the exit tax exceeds 2.57 million euros on the date of the transfer of tax residence outside France (art. 167 bis, VII, 2 CGI);

The rebate or refund applies to both personal income tax and social security contributions (for departures outside France before 1 January 2014, see L. n° 2023-1322, 29 déc. 2023, art. 11: Dr. fisc. 2024 n° 3, comm. 93).

This ground for relief does not apply to deferred capital gains.

– Death of the taxpayer;

Social security contributions are also refunded or mitigated.

– donation of securities, clarifying that when the taxpayer is a resident of a state that does not allow automatic deferral, the deduction or refund is made only if the donor demonstrates that the main purpose of the donation was not to evade tax;

Social security contributions are also refunded or mitigated.

– return to France ;

– Social contributions are also refunded or mitigated, compliance with the conditions of an exemption scheme at the time of the sale;

– When the capital gain on the sale fulfils the conditions for the application of an exemption scheme within the meaning of Article 150-0 A, III of the CGI (FCPR shares and SCR shares) and the sale or redemption is made by a taxpayer tax resident in an EEA country other than Liechtenstein, social security contributions remain payable.

– The occurrence of one of the events that permanently exempts capital gains placed under a tax deferral scheme;

In particular in the event of death or gift of securities to which a tax deferral is attached under the provisions of Articles 92 B, II, 160, Ib, 1 and 160, Ib, 4, as they were before 1 January 2000, or Article 150-0 B ter.

– Transfer of tax residence to a State allowing automatic deferral of a taxpayer who did not benefit from the deferral when he left France.

Although the taxpayer can request a refund of tax and social security contributions, he/she is still liable for the tax on unrealised capital gains and benefits from the automatic deferral of payment.

Please note :

In the event of a tax reduction, the guarantees are released up to the reduced tax amount. In addition, at the taxpayer’s request, the costs incurred in setting up the guarantees (mortgage, etc.) will be refunded.

For afgange frem til 31. december 2018 er skatteyderens rapporteringsforpligtelser angivet i tabellen nedenfor.

13. Reporting obligations

For departures up to 31 December 2018, the taxpayer’s reporting obligations are set out in the following table

(1) Filed with the non-resident personal income tax department.

(2) Filed with the personal income tax department to which the taxpayer belonged before moving his tax residence outside France.

(3) Filed with the non-resident tax department.

(4) The tax return must state the nature and date of the event that led to the expiry of the deferral and the amount of tax due.

(5) All these formalities must be carried out by the non-resident’s tax department.

For departures taking place after 1 January 2019, the annual monitoring statement is limited to claims related to an earn-out and to tax-deferred capital gains.

However, the annual tax return will still be required for taxpayers who declare unrealised capital gains in addition to claims and/or deferred capital gains.

In this case, they must still annually declare the cumulative amount of all taxes deferred and the amount of all capital gains and claims subject to the exit tax (art. 167 bis, IX, 2 CGI).

For transfers of residence made after 22 November 2019, the taxpayer wishing to benefit from the deferral of payment on request must file form no. 2074-ETD with the non-resident individual tax department at least 90 days before the transfer of tax residence outside France (art. 41 tervicies A ann. III, CGI).

As a result, the proposed guarantees must reach this department within the same timeframe (art. R. 277-8 LPF).

In practice, taxpayers who benefit exclusively from the tax deferral for unrealised capital gains must declare these on form 2074-ETD:

– at the time of the change of tax residence outside France (if applicable, before the change of tax residence in order to benefit from the voluntary deferral of payment and in any case during the year following the departure within the deadline set for the tax return);

– upon the occurrence of an event leading to the expiry of the payment deferral (including at the end of the 2- or 5-year holding period, as the case may be).

From now on, these taxpayers will not be required to file annual tax returns (no. 2704-ETS) for deferred tax payments if there are no events affecting the securities to which the capital gains in question relate.

The taxpayer must inform the non-resident tax department on plain paper of any change of tax residence after the initial change of tax residence outside France within 2 months of the change.

In the event of an event giving rise to a tax credit or refund, failure to submit the application for a tax credit or refund within the statutory deadline for filing the tax return for the year in which the event occurs will result in the deferred tax being payable immediately.

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NICE
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com

Reduced VAT on home renovation: for what kind of work?

If you are renovating your home, you can benefit from a reduced VAT rate of 10% or even 5.5% instead of the standard rate of 20%.
What work is eligible? What conditions do you need to fulfil? We’ll explain.

What will change in 2025 ?

The reduced VAT rate for the supply and installation of fossil fuel boilers has been abolished with the 2025 Finance Act.
The VAT rate, previously 5.5% or 10% depending on the type of appliance, will increase to the standard rate of 20%.
And whereas until now it has been necessary to complete a certificate guaranteeing compliance to benefit from a reduced VAT rate of 10% and 5.5% for certain types of work, a simple declaration on the invoice or estimate will now suffice (Article 41 of the Finance Law for 2025).
Read all about it in this article.

What are the reduced VAT rates?

Value Added Tax (VAT) is a tax levied directly on the goods you consume or the services you use.
The standard rate is 20%.
However, two reduced VAT rates apply to certain types of work:
– a reduced rate of 10%,
– a reduced rate of 5.5%.
Depending on the work performed and under certain conditions, you may be eligible for one of these reduced rates.

Reduced VAT rates: Who can benefit?

Reduced VAT rates apply to work carried out by :
– homeowners
– landlords
– joint owners’ associations
– tenants
– independent residents
– non-commercial property companies (SCI).

Reduced VAT rates: for which homes?

To be eligible for a reduced VAT rate, the work must be carried out in homes that fulfil the following criteria:
1. They must have been completed more than two years before the start of the work,
2. used for residential purposes or intended to be used for residential purposes when the work is completed.
The property can be occupied as a primary or secondary residence.

Reduced VAT rates: for what work?

Work subject to the VAT rate of 10.
VAT at a reduced rate of 10% applies to improvements, conversions, fitting out and maintenance work, with the exception of the part corresponding to the supply of household equipment or furniture and the purchase of certain major items of equipment (Article 279-0 bis of the General Tax Code).

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NICE
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com

Article 4 of the Code of Criminal Procedure, as amended by Law No. 2007-291 of 5 March 2007, provides that a civil action for compensation for damages caused by a criminal offence may be brought before a civil court independently of the public prosecutor.

However, the civil action must be stayed until a final decision is made on the public prosecution if the public prosecution has been initiated.

On the other hand, the initiation of the public prosecution does not require a stay of judgement in the other cases brought before the civil court, even if the decision to be taken in the criminal proceedings is likely to have an impact on the outcome of the civil proceedings.

(Versailles Court of Appeal, Social Division, 27 February 2025, Répertoire Général No 24/02477 and Lyon Court of Appeal, 3rd Chamber A, 16 November 2023, Répertoire Général No 19/04915).

Article 4(3) states that the commencement of criminal proceedings does not automatically suspend other civil proceedings, except for actions for compensation for damage caused by the offence.

This provision aims to prevent civil proceedings from being unnecessarily delayed by ongoing criminal proceedings, while respecting the legal force of criminal proceedings in relation to civil proceedings (Versailles Court of Appeal, Social Division, 27 February 2025, Répertoire Général No 24/02477).

Case law confirms this interpretation, as shown by the decision of the Versailles Court of Appeal of 27 February 2025, which applies Article 4(3) by specifying that the civil court may continue to rule on other civil cases even if a criminal decision is pending.

Furthermore, on 16 November 2023, the Lyon Court of Appeal ruled that the mere filing of a criminal complaint does not automatically justify a stay of proceedings in civil cases (Lyon Court of Appeal, 3rd Chamber A, 16 November 2023, Répertoire Général no. 19/04915).

In conclusion, Article 4 of the Code of Criminal Procedure strikes a balance between the independence of civil proceedings and the need not to hinder criminal proceedings, while allowing civil courts to continue their judgment independently of ongoing criminal proceedings, except in cases of compensation for damages caused by the offence.

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NIC
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com

The new Finance Law 2025 has introduced the following three points: the creation of an exceptional corporate tax contribution for large companies (I), the lowering of the VAT exemption thresholds from 1 March 2025 (II) and finally the abolition of the CVAE, postponed to 2030, and the creation of an additional contribution for 2025 (III).

I/ The extraordinary corporate tax contribution for large companies

The extraordinary contribution to the corporate income tax for large companies is a temporary additional tax introduced by Article 48 of the 2025 Finance Law.

It applies to companies subject to corporate income tax with sales of €1 billion or more in the first financial year ending on or after 31 December 2025.

This contribution is based on the amount of corporate income tax due for that financial year and aims to contribute to the recovery of public finances.

For tax-integrated groups, the parent company is responsible for paying this contribution.

Tax credits and tax receivables cannot be offset against this contribution (article 235 ter ZAA of the French tax code).

The contribution must be paid spontaneously to the competent public accountant no later than the date set for the payment of the balance of the corporate income tax (Article 1668 B of the General Tax Code).

II/ Lowering of the VAT exemption thresholds from 1 March 2025

From 1 March 2025, a single basic VAT exemption threshold of €25,000 in annual turnover will be introduced, regardless of the nature of the activity carried out.

However, this reform has been suspended until 1 June 2025 to allow time for stakeholder consultation.
The current thresholds of €85,000 for the sale of goods, €37,500 for the provision of services and €35,000 for lawyers, authors and performers will therefore continue to apply.

If the turnover limit for the current year is exceeded, the exemption will cease to apply from the date the limit is exceeded (Article 293 B of the General Tax Code).

The exemption does not apply to transactions covered by Article 257, Article 298 bis and transactions subject to VAT by virtue of an option under Articles 260, 260 A and 260 B for the supply of new means of transport (Article 293 C of the General Tax Code).

The exemption also does not apply when the tax authorities have drawn up an official report on tax evasion or when the taxable person is involved in a hidden activity (Article 293 BA of the General Tax Code).

Taxable persons established in the EU can benefit from the basic tax exemption scheme in their country of establishment and in other Member States under certain conditions.

III/ CVAE cancellation postponed to 2030 and creation of an additional contribution for 2025

The abolition of the CVAE, originally planned for 2025, has been postponed to 2030.

The rate of CVAE will be gradually reduced until 2029.

At the same time, an additional contribution to the CVAE has been introduced in 2025.

This contribution will be payable by companies that have to pay CVAE for 2025 and the rate is set at 47.4% of the CVAE payable for that year.

The details of this additional contribution are set out in Article 62 of the Finance Law for 2025, in particular with regard to the basis, rate and conditions for payment.

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NIC
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com

When did the obligation to file a tax return come into force?

The obligation to file a tax return for taxpayers subject to the controlled tax return system has been in force since 30 April 1950. Taxpayers must file an annual tax return, the content of which is determined by decree (Article 97 of the General Tax Code).

Inheritance tax returns will gradually be filed electronically, with the obligation to file and pay electronically from 1 July 2025. The deadline for taxpayer’s resident in France is 15 June and 15 July for non-resident taxpayers.

For financial institutions, the deadline for submitting the required information is brought forward to 15 July from 2025.

What is the statute of limitations for tax returns in France?

The statute of limitations for tax returns in France is generally three years. This period is set out in Article L. 169 of the French Tax Procedure Code (LPF).

However, this period can be extended to ten years in cases of tax fraud or insufficient taxation revealed by legal or administrative procedures. In addition, the statute of limitations for associations that do not file their tax return is six years.

When does the tax limitation period start to run?

The limitation period for tax returns begins to run on 31 December of the year in which the tax return was or should have been filed.

This rule is interpreted in case law as a ‘three-year limitation period for the offences referred to in Articles 1741 and 1743 of the General Tax Code, which only runs from 31 December following the date on which the tax return was or should have been filed’.

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NICE
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com

How do you calculate your tax based on the income tax scale?

The progressive income tax scale is used to calculate tax. It consists of several brackets, each with its own tax rate. Find out how to calculate your tax.

What changes with the 2025 Finance Act?

The income tax scale has been increased by 1.8% for each step to neutralise the impact of inflation on household taxation.

How do you calculate your income tax?

Income tax is calculated on the basis of net taxable income in three main steps:

1. Divide your net taxable income by the number of family units with children,
2. Apply the progressive income tax scale applicable to the income in that year to this result,
3. multiply the result by the number of family supplement units to calculate the amount of tax due

Tax scale: the steps to calculate your income tax

The tax on your income in 2024, which you declare in 2025, is calculated in increments according to your income.

Example: For a single person with a net taxable income of 32.000 EUR in 2024, the family allowance is a proportion, so the operation is 32.000 EUR/ 1= 32.000 EUR.

To calculate his/her tax, this result must then be subjected to the scale that applies to income received in 2024:

– Income bracket up to 11.497 EUR taxed at 0% = 0 EUR
– Income bracket from 11.498 EUR to 29.315 EUR taxed at 11%: i.e. (29,315 – 11,497) x 11% = 1.959.98 EUR
– Income bracket from 29.316 EUR to 32.000 EUR taxed at 30%: i.e. (32,000 – 29,315) x 30% = 805.50 EUR.

This single person’s marginal tax rate is 30%, but not all of his income is taxed at 30%. The total result is 0 + 1.959,98 + 805,50 = 2.765,48 EUR.

To find out how much tax the single person has to pay on their income, multiply this amount by the number of family units the single person has: 2.765,48 EUR x 1 = 2.765,48 EUR.

Another example : A married couple with two minor children with a net taxable income of 55.950 EUR in 2024.
The couple has three shares (two shares for the couple and half a share for each child), so the taxable income of 55.950 EUR is divided in three = 18.650 EUR.

To calculate their tax, this amount is subject to the income tax scale:
– Income bracket up to 11.497 EUR taxed at 0% = 0 EUR
– Income bracket from 11.498 EUR to 18.650 EUR taxed at 11%: i.e. (18,650 – 11,497) x 11% = 786,83 EUR.

As this family has three family benefit shares, this result must be multiplied by the number three. The couple’s income tax is therefore 786,83 EUR x 3 = 2.360,49 EUR.

As their income tax is below the threshold of 3.248 EUR it is entitled to a discount (see section below), which is calculated as follows: 1.470 EUR – (2,360.49 x 45.25%) = 1.470 EUR – 1.068,12 EUR = 401.88 EUR or, rounded up, 402 EUR.

The tax amount after applying the discount is therefore: 2.360,49 – 402 = 1.958,49 EUR.

What are the adjustments to the net tax payable?

The amount you pay in income tax may be adjusted according to your situation:

– cap on the family tax allowance,
– tax breaks for modest incomes,
– tax reductions and deductions,
– contributions on high incomes.

Ceiling on the family allowance

The tax benefit of the family allowance (i.e. the number of tax units in your household) automatically increases with the level of declared income.
To reduce the impact of this tax benefit on high incomes, the family allowance is capped with a maximum benefit for each additional half share.

As a result, the tax reduction linked to the family allowance is limited to :
– 1.791 EUR for each additional half share,
– 896 EUR for each additional quarter share.

To find out if you are affected by the family allowance cap, the tax authorities make the following two calculations and compare them:
– tax calculated on the basis of two shares minus the cap on the family allowance,
– tax calculated based on the actual number of shares.

If the second calculation is lower than the first, you get a cap and have to pay the tax from the first calculation.

Tax relief for low-income earners

Decote is a system that reduces the tax payable by taxable households with modest incomes.

To benefit from this mechanism, your gross income must not exceed the following limits in 2025 (tax return for 2024):
– 1.964 EUR for a single, divorced or widowed person,
– 3.248 EUR for a married couple subject to joint taxation.

The discount applies automatically. The discount is obtained by deducting 45.25% of the gross tax amount from the fixed amount of 889 EUR for single taxpayers or 1.470 EUR for jointly taxed taxpayers.

Tax reductions and deductions

Tax reductions and deductions are deducted from your gross tax. Tax benefits, also known as tax niches, are generally limited to 10.000 EUR. This overall cap is the same for all taxable households.
Certain tax benefits are excluded, such as donations to organisations that serve the public interest or expenses for institutions for dependent persons.

The contribution for high incomes

The extraordinary contribution for high incomes is added to income tax. It applies to taxable households with a reference income above the following thresholds

– 250.000 EUR if you are single, widowed, separated or divorced,
– 500.000 EUR if you are married or in a registered partnership and subject to joint taxation.

The rate of this tax varies according to your household situation and your income according to a progressive scale:

Med venlig hilsen / Kind regards
Cabinet Nicolas BRAHIN
Advokatfirma i NICE, Lawyers in NIC
Camilla Nissen MICHELIS
Assistante – Traductrice
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
Camilla.nissen.michelis@brahin-avocats.com
www.brahin-avocats.com