France Postpones Capital Gains Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

22 September 2005

The French government has decided to postpone a capital gains tax reform designed to shield domestic firms from foreign takeovers whilst it concentrates on weightier issues.

According to a report by French daily Les Echos, the capital gains tax reform, which was initially part of the 2006 budget plan, is to be included in an end-of-year mini-budget.

Under the proposal, capital gains tax on the sale of shares would have been progressively reduced according to the length of time that the shares are held.

However, key components of the tax reform have yet to be worked out, and with the French government set to include a number of major tax initiatives in next week's budget, the proposal has fallen down the list of its priorities.

Earlier in the month, French Prime Minster Dominique de Villepin announced proposals for a major overhaul of France's tax system and a resumption of income tax cuts in a package worth EUR3.5 billion. These measures will reduce the number of tax brackets to four from seven, and reduce the amount of tax paid by those earning EUR30,000 per year by 15%.

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