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France: Joint Commission Adds Final Touches To 2010 Finance Bill

by Ulrika Lomas,, Brussels

17 December 2009

A joint commission, composed of seven deputies from the French National Assembly and seven senators, has finalized details of the country’s 2010 Finance Bill, just ahead of the final vote on December 18.

The 2010 Finance Bill, which provides for the abolition of the country’s highly controversial local business tax, has been modified on numerous occasions over the course of its two-month examination in parliament.

Amongst key judgments made by the joint commission is the decision to postpone changes to the country’s 'Scellier' initiative until January 1, 2011. Consequently, investors in rental property will continue to benefit from a 25% tax reduction in 2010, even if the property does not comply with the low consumption building standard (bâtiment basse consommation - BBC).

In 2011, however, the tax reduction will be reduced to 15% for any properties failing to comply with the BBC standard. The Scellier initiative is due to be withdrawn completely by end-2012.

The joint commission has also elected to lower the general ceiling imposed on tax breaks in France, thus further limiting the maximum amount of cumulative reductions in income tax to which an individual taxpayer is entitled.

For income received in 2010, the amount of tax breaks in France will be limited to EUR20,000 (USD29,510) plus 8% of taxable income. Up until now, the general ceiling has been EUR25,000 plus 10% of taxable income. The French government nevertheless remains vehemently opposed to the measure.

The regulations regarding investment in small and medium-sized enterprises (SMEs) as a means of reducing an individual’s wealth tax (ISF), have also been slightly modified. In order to benefit from a reduction in ISF, half of all resources collected by an investment fund must be invested in an SME within the first eight months. The remainder must then be invested in the eight months that follow.

Regarding local business tax, the joint commission has chosen to uphold plans by the Senate to maintain the link between businesses that pay their value-added contribution and the area in which that tax was produced (towns and municipalities, departments, and regions).

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