As you know, on July 07, 2024, parliamentary elections were held, redefining the composition of our National Assembly. Depending on the various political alliances, certain program elements may be implemented during 2024, the financing of which could have an impact on taxation.
So we wanted to bring you our expertise so that you can make informed decisions.
Your wealth and tax strategies depend on the laws in place. In the current post-legislative context, it’s important to know which transactions benefit from a fixed tax rate, and which have an uncertain tax rate until the end of the year.
Operations with fixed tax rates
Private law operations
All transactions relating to inheritance law, in particular transfers and gifts, are frozen as from the operative event.
For example, if you have made a gift to your children, the gift will always be recorded at the end of the year, and the tax is paid at the time of the triggering event.
In particular, there will be no retroactivity when it comes to free transfer tax. Once again, the applicable legislation is that in force on the day of the taxable event.
Local taxes: property tax, council tax, etc.
For local taxes, the applicable legislation is that in force on January 1ᵉʳ of the tax year, regardless of when the tax is assessed.
Real estate capital gains transactions (pvi)
Capital gains tax on real estate is declared and paid when the property is sold. The applicable legalization is that in force on the day of sale.
However, a change in legislation can have an indirect impact on the capital gains of private individuals. This would be the case if the rules relating to the exceptional contribution on high incomes (CEHR) were modified before the end of the year.
Property wealth tax (IFI)
For the IFI, the taxable event is January 1ᵉʳ of the year.
For example, for the IFI 2024, the applicable legislation is that in force on January 1ᵉʳ, 2024, i.e. that resulting from the Finance Act for 2024 enacted at the end of 2023.
Transactions subject to flat-rate withholding tax (PFL)
Surrenders of life insurance policies resulting from premiums paid before 2017 can benefit, on option, from the withholding tax at the time of surrender.
This deduction enables the tax to be paid definitively. Thus, a change in the rate after the redemption date will not change the tax already paid, unless there is a sufficiently compelling reason to do so.
Operations whose tax status will not be fixed until December 31, 2024
Each year, the Finance Act is debated in Parliament during the 4thᵉ quarter, with a view to enactment before December 31st of the current year. It also happens that a finance law is passed during the course of the year, in which case it is known as a loi de finances rectificative.
Income tax
For income tax (IR) and profit tax (BIC, BA, BNC), unless otherwise provided by law, the applicable legislation is that in force on December 31 of the year in respect of which the tax is assessed, i.e. the year in which the taxable event occurs.
As a result, it is not possible to know until December 31, 2024 how income received in 2024 will be taxed, whatever the income category (capital gains, dividends, wages and salaries, property income, etc.).
For example, in the event of a dividend distribution in September 2024, the taxation terms would not be fixed until December 31, 2024.
Tax deferrals
In the case of deferred taxation, the applicable tax rate is that in force on December 31 of the year in which the shares are transferred. The tax deferred is then theoretically frozen in the event of changes in subsequent years.
Corporate income tax
In terms of corporate income tax (CIT), the applicable legislation is that in force on the day the financial year ends. The closing of a fiscal year can be the result of various events: the normal closing of the fiscal year, the sale of the business, the dissolution of the company, the cessation of activity, or the company’s changeover from corporate income tax to personal income tax.
Let’s take the example of a corporation subject to corporate income tax with a fiscal year running from June 1ᵉʳ, 2023 to May 31, 2024, and that on June 2, 2024, an amending law for the year 2025 is enacted.
Therefore, the company will not be affected by the changes made to its financial year ending May 31, 2024. However, its fiscal year ending May 31, 2025 will be.
Exit tax
In the case of exit tax, the capital gain is taxed in accordance with the tax rate applicable to gains of the same kind realized in France on the date of the change of tax domicile. Thus, a change in the rate after the transfer of the tax domicile will not change the tax already paid, unless there is a sufficient reason of general interest.
However, the rate applicable to transfers of domicile may be modified as from the tabling of a Finance Act.
