France introduces an exceptional tax on high net income taxpayers

January 1, 2012

As part of the austerity plan started in 2011, the Finance Act for 2012 introduces an exceptional tax to be levied on those individuals with annual net taxable income exceeding EUR 250,000.

The new tax is to be levied both on French tax residents and on non-French tax residents with French source income.  This tax is to be assessed on reference income, that is, the aggregate of the net income and gains of all categories, including tax exempt income, less expenses and costs that are allowed for deduction from the global income.  The exceptional tax is levied at the rates of 3% and 4%.

The 3% rate applies to the portion of the reference income between EUR 250,000 and EUR 500,000 for a single person and the portion of income between EUR 500,000 and EUR 1,000,000 for a couple subject to joint taxation.

The 4% rate applies to reference income exceeding EUR 500,000 for a single person and EUR 1,000,000 for a couple subject to joint taxation.

For example, a single individual with an annual reference income of EUR 300,000 is liable for an exceptional contribution of EUR 1,500 (EUR300,000 – 250,000) x 3%.  A married couple with reference income of EUR 1,250,000 would be liable for a payment of EUR 25,000 (EUR1,000,000 – 500,000) x 3% + (EUR250,000 x 4%).

To mitigate the impact of the new exceptional tax on individuals receiving exceptional income, for example, as a consequence of a real property sale, the new legislation provides for a specific system under which the reference income would be calculated by averaging the reference income of the two preceding years.

The exceptional tax will be raised for the first time on income earned in 2011 and will remain in force until the public deficit falls below 3% of GDP.


2012 Finance Act (loi de finances pour 2012) Law NO.2011-1977 dated 28 December 2011

For further information or to discuss any of the issues raised, please contact Pascal Ngatsing on +33 (0)1 43 59 43 12.


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