Taxation of wealth is under significant reform in the proposed supplementary budget for 2011, changing the scale of the ISF, the elimination of the tax shield and the increase of human donation are the key measures.But we keep forgetting that the Government also proposes “ new ability to pay tax “and to adapt the law” to limit the possibilities of optimization “and” strengthen the tools to fight against tax evasion .“
Internationally, four measures are particularly worthy of attention and will be commented in detail at the forthcoming conference on “The new ISF, version 2011.”
A first step, symbolic, is to reintroduce an “exit tax” in the spirit of that which was set up by the Finance Act 1999 before being repealed by Finance Act 2005, but the expanding and modifying it to prevent it from being incompatible with EU law and tax treaties.The stated objective is to deter individuals from transferring their tax residence outside France, for example in Belgium, the United Kingdom or Switzerland, to realize capital gains by avoiding any taxation in France than in their new host country.
To this end, it is proposed to establish the principle of immediate taxation of unrealized capital gains on shareholdings significant (greater than 1% or 1.3 million euros) in the transfer of tax residence outside France (this would apply to transfers of domicile occurred since March 3, 2011).
By simplifying the tax payers living in France for six years before transferring their tax residence outside France should report these gains (as well as the old-deferred capital gains) but they could benefit from a stay of payment automatically if you leave within the EU (and Norway) and conditional upon leaving outside the European Union.In the latter case, the stay would be particularly subject to the provision of guarantees, except in cases of transfer of residence for business purposes under certain conditions.
At the end of a period of eight years following the transfer of tax residence, or if you return earlier in France, the tax imposed at the start would be automatic relief or returned, however the additional social contributions remain payable.If, on the sale of securities, the gain proved initial lower than the actual gain, the tax would, however, established that the real added value.
The second measure notable foreign trusts to eliminate their use for tax planning.When the description of gift or estate can not be accepted and therefore the rights of inheritance tax can not be applied according to the rules of law, human rights and inheritances specific would now be applied, that the property , rights or products are capitalized passing on the death of the settlor or at a later date.These fees are due when the deceased is a resident for tax purposes in France, where the properties on trust are located in France.Thereafter, if the assets and rights remain in the trust from generation to generation, taxation would be operated under the same conditions between successive beneficiaries.
Furthermore, it is planned to make the component liable to wealth tax in respect of property or rights placed in trust as well as products that are capitalized in accordance with the rules of territoriality.For good measure, the law would require the administrator of the trust (the trustee) to pay a special tax of 0.50% of assets, rights or products capitalized up the trust, except in case of declaration for the ISF.
Finally, the administrator of a trust whose settlor or at least one of the beneficiaries would have their tax domicile in France, or that includes an asset or interest therein situated, would now be held in various reporting requirements in France.
A third measure seeks to end a tax optimization scheme familiar to non-residents who may seek to escape the ISF in respect of immovable property situated in France and owned by an SCI, SCI funding by a current account, the current account reduces the value of the shares while it is not itself taxable, is considered an exempt financial investment when held by a non-resident.Now, the debt would not be deductible in calculating the taxable value of shares of SCI.
Finally, the last measure, rather symbolic for now, it is proposed to submit to an annual tax of 20% of the cadastral rental value of second homes by non-residents whose income from French sources only a small part of total revenues.