Since February 13, 2012, the French National Assembly (Lower House of the French Parliament) has started reviewing the first draft of the Modified Finance Bill for 2012. The draft should be debated at the French Senate (Upper House of the French Parliament) from February 21, 2012, to February 25, 2012. The Joint Committee of the French Parliament is scheduled on February 28, 2012, for a definitive adoption of the Bill, on February 29, 2012.
This Bill follows the tax measures announced by the French President during his last speech on January 29, 2012.
The main measures reviewed and adopted by the French National Assembly on February 16, 2012, are set out below.
Registration fees reform on the sale of shares
The French Finance Bill for 2012 has deeply reformed the registration fees payable on the sale of shares as from January 1, 2012 by (i) abolishing the ceiling of Euros 5,000 and (ii) implementing a new sliding scale of registration fees according to the sale price (from 3 percent to 0.25 percent of the sale price).
During the review of the draft of the Modified Finance Bill for 2012, the French National Assembly has adopted an article which reforms again the registration fees payable on the sale of shares.
The sale of shares listed on a stock exchange (only for the sales made through a deed) and the sale of shares not listed on a stock exchange should now be taxed at a fixed rate of 0.1 percent of the sale price.
The abolition of the ceiling on registration fees should not be reformed and the current regime applicable to the sale of partner's shares should not be modified (3 percent of the sale price after a tax deduction of Euros 23,000 per sale).
Finally, the registration fees of 0.1 percent should not apply to transactions that will be subject to the new tax on financial transactions. This new tax on financial transactions should concern the transactions on listed companies located in France and for which the market capitalization exceeds Euro one billion (see below).
Implementation of a tax on financial transactions
The French National Assembly has adopted the article implementing a new tax as from August 1, 2012 on financial transactions. This tax mainly focuses on the sales of shares listed on a stock exchange and some derivative contracts (naked credit default swaps (CDS) and high-frequency trading operations).
For sales of shares listed on a stock exchange, this new tax should be equal to 0.1 percent on all transactions concerning companies located in France and whose market capitalization exceeds Euro one billion. The amount of this tax should not be capped.
This tax should not apply to transactions carried out in respect of employees' saving schemes (stock-options, allocation of RSU (free shares), Perco etc.) and intra-group operations.
The rate of this tax should be equal to 0.01 percent for naked CDSs and high-frequency trading operations.
Increase in social contributions on certain individual incomes
The 2nd Modified Finance Bill for 2011 has increased the rate of social contributions from 12.3 percent to 13.5 percent on property and investment products.
During the review of the draft of the Modified Finance Bill for 2012, the French National Assembly has voted a 2 percent increase (from 3.4 percent to 5.4 percent) of the social contribution.
Consequently, the total amount of social contributions due on property (such as land revenues and capital gain on sale of securities) and investment products (such as dividends, interests, real estate capital gains) should be set at 15.5 percent.
This new 15.5 percent rate should apply to investment products received on or after July 1, 2012 and to property products received since January 1, 2012.
Implementation of the Social VAT
The French National Assembly has adopted the article of the Bill concerning the increase from 19.6 percent to 21.1 percent of the normal rate of VAT.
This increase should apply as from October 1, 2012.
In France, these applicable VAT rates should thus be set at 21.2 percent (normal rate), 7 percent (previous reduced rate of 5.5 percent that has been increased by the 4th Modified Bill for 2011) and 2.1 percent (super-reduced rate).
Fight against international tax fraud and tax evasion
The French National Assembly has also voted stepping up sanctions against tax fraudsters.
On the one hand, in case of failing to report bank accounts held in a foreign country when the account balance exceeds Euros 50,000, a penalty equal to 5 percent of this credit balance should apply without being inferior to Euros 1,500 in most cases, and Euros 10,000 for bank accounts held in a NCCT (Non-Cooperative Countries and Territories).
Similarly, in case of failing to report foreign life insurance contracts, a penalty of Euros 1,500 should apply. This penalty should be increased to Euros 10,000 for accounts held in a NCCT and to 5 percent of the value of this contract if it is greater than Euros 50,000.
On the other hand, in case of tax fraud, the amount of the criminal fine should be increased to Euros 500,000 instead of Euros 37,500. This fine should be increased to Euros 750,000 instead of Euros 75,000 when there are either purchases or sales without any invoice, or invoices which are not related to real transactions, or where their purpose is to obtain an unjustified refunding from the State.
Finally, in case of tax fraud made through tax havens, penalties should be increased to seven years of imprisonment and to a fine of Euros 1,000,000.
Client Alert 2012-051