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French Deputies Adopt Year-End Budget

by Ulrika Lomas, Tax-News.com, Brussels

24 December 2012


The French National Assembly has adopted the government’s 2012 year-end supplementary finance bill (PLFR), providing notably for the introduction of a growth and employment tax credit (CICE) aimed at boosting competitiveness in France, to be funded by modifications to the value-added tax (VAT) rates.

Although the French Socialist, radical left, and ecologist parties voted in favor of the text, the opposition Union for a Popular Movement, centre UDI, and Left Front parties voted against the bill, denouncing the EUR20bn (USD26.48bn) tax credit accorded to businesses in France and the VAT measures intended to finance the provision.

France’s third supplementary budget provides for a deficit of 4.5% of gross domestic product this year and maintains the growth forecast for 2012 at 0.3%.

Due to enter into force in France on January 1, 2013, the CICE tax credit will benefit companies employing salaried staff, and will be equal to 4% in 2013 of gross payroll for remuneration equal to or below 2.5 times the minimum wage, rising to 6% in 2014.

To finance the CICE, the PLFR provides for changes to the VAT rates from January 1, 2014. The bill lowers the reduced VAT rate from 5.5% to 5%, while raising the intermediate VAT rate from 7% to 10%, and increasing the standard VAT rate from 19.6% to 20%.

Following an amendment to the bill, the PLFR now creates an additional tax on real estate capital gains. Due to apply from January 1, 2013, the surtax will not, however, be imposed on capital gains realized on the sale of a main residence.

The bill provides for a 2% surtax to be levied on capital gains of between EUR50,000 and EUR100,000, a 3% surtax to be imposed on capital gains of between EUR100,000 and EUR150,000, a 4% surtax on gains of between EUR150,000 and EUR200,000, a 5% surtax on gains of between EUR200,000 and EUR250,000, and a 6% surtax on gains in excess of EUR250,000.

Finally, the 2012 year-end collective budget contains a raft of measures aimed at combating tax fraud and tax optimization in France.

TAGS: compliance | tax | business | value added tax (VAT) | tax compliance | property tax | tax avoidance | real-estate | budget | payroll | tax credits | tax rates | France | tax breaks

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