The 30% flat taxation of financial incomes (flat tax) is the most significant tax measure that was adopted in 2018 after President Emmanuel Macron’s election in an effort to stop French high net wealth individuals (HNWI) relocating outside France. The 30% flat tax consists of 12.8% income tax and 17.2% social contributions, which is much lower than the general bracket rates applicable otherwise (up to 45% on incomes exceeding €156,000 (£135,000) plus 17.2% social contributions). The actual income tax rates (12.8% under the 30% flat tax or 45% under the standard bracket rates) will be increased, however, by 3% to 4% for high incomes (ie, exceeding €250,000 euros for single taxpayers or €500,000 euros for couples). Because the 30% flat tax does not allow basis rebates that could otherwise apply to dividends (40% basis rebate) and capital gains (up to 85% basis rebate depending on holding period and nature of the business), the 30% flat rate can, in some specific cases, result in a higher tax burden. Therefore, taxpayers can opt out of the 30% flat tax, in which case all their financial income is subject to the standard bracket rates after basis rebates. No cherry picking is allowed as the election is global for a given year. Practically speaking, the 30% flat tax is almost always more favorable, save capital gains eligible for a 85% basis rebate, which only relate to shares held for at least eight years in certain EU SMEs.
展开▼
