The draft of Finance Bill for 1996 was decided by the Council of Ministers on September 20, 1995 and presented to the press. It had been submitted to the French Parliament. The major provisions of this draft are described here below.
1. PERSONAL INCOME TAX
Tax credit relating to life insurance premiums
The tax reduction linked to life insurance premiums might be suppressed concerning premiums paid as of September 20, 1995 (except those linked to contracts with periodical premiums concluded or extended before this date).
In case of sale of shares purchased or submitted through a stock option plan more than five years after the date of issuance of these shares, the advantage corresponding to the difference between the value of the shares at the time the option is exercised and the value of issuance would now be taxed at 30% (33.4% social withholding of 1% and CSG -French specific tax- included) and no longer at 19.4%. This would apply to options allocated as of September 20, 1995.
Losses incurred by non professional activities
Industrial and commercial losses triggered by non professional activities would no longer be offsetable against the global income but only against profits withheld from the same activities during the involved year and the five following years. This decision more particularly aims at losses generated by investments realized by individuals in some fields of activity (hotel business, tourism residencies, sailing ...). It would apply to investments realized as of September 20, 1995. Operations realized on the DOM-TOM territories after approval would however not be concerned.
Specific allowance on interests of bonds and dividends
The reduction of FF 8,000 or FF 16,000 on real estate incomes would be limited as of 1996 to stock dividends, incomes from shares of an SARL and interests of partners escrow accounts.
The general taxation ceiling for capital gains linked to the sale of real estate values would be decreased to FF 200,000 for the year 1996 and FF 100,000 for the year 1997. Capital gains arisen from the sale of shares of monetary or bond capitalisation UCITS (Undertakings for Collective Investments in Transferable Securities) would be taxable whatever the amount of the sales as of 1996.
2. CORPORATE INCOME TAX
Research tax credit
The system of research tax credit applicable to the companies would be renewed for a three-year period. However, this renewal could only benefit to the companies which elected this system for the latter period ending in 1995.
3. WEALTH TAX
The taxation ceiling for wealth tax would be increased to FF 4,610,000 and the brackets of the tax scale increased of about 1.8%. The advantage resulting from the ceiling system would in principle be limited to 50% of the amount of the wealth tax.
4. REGISTRATION DUTIES
An allowance of 50% on the value of professional goods transmitted between living individuals would be instituted (not exceeding MF 100). This would apply to settlements granted through authentic deeds registered as of January 1st, 1996, relating to full ownership rights of more than 50% of the whole goods assigned to the operation of an individual company, the shares or financial rights and voting rights linked to companies shares. As of the year 1997, the donor should be less than 65 years old at the time of the transmission.
To benefit from this measure, the donee should undertake in the involved deed to keep at least during 5 years the professional goods transmitted.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be brought about your specific circumstances. For additional information contact Claire Acard on 33/(1)/42.91.07.00 or Lionel Benant on 33/18.104.22.168 or enter text search: "ARCHIBALD ANDERSEN Profile". The members of ARCHIBALD ANDERSEN Association d'Avocats (S.G. Archibald and Arthur Andersen International) are registered with the Hauts-de-Seine Bar and the Lyon Bar.
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