Major reforms of French investments taxation

• 0.25 % for assets between M € l.3 and M€3
• 0.5 % abov

.

Capital gains on property

• Until now during the sale of the property, the owners benefited from a 10 % allowance per year beyond the fifth year of ownership, (that meant a total exemption of the capital gain tax at the end of 15 years). The exemption will be substantially reduced and the period for relief extended which is currently in debate in the National Assembly. According to the last version of the bill (not definitive), the tapering relief has been reduced to 2 % for every year of detention after the fifth year, 4 % from the eighteenth year to the twentyfourth year, and finally 8% afterwards, which is a total exemption after thirty years of ownership. This new method of calculation will come into effect for the transfers realized as from February 1st, 2012, except for the case of private individuals of certain cases of restructuring for where the reform would apply as from August 25th, 2011.
• The taxable capital gain resulting from the sale of a holiday home, a rented property or land remains taxable at the 19% rate plus 12.30% of social charges (13.5% as from 2012), which is a total at present of 31.30% subject to any appropriate relief.

• The reestablishment of the allowance for a donation has been extended from 6 to 10 years.
• The reductions of duty concerning a donation according to the age of the donor rescinded.

• An annual taxation 0.50% based on the market value of the assets of the trust is chargeable to the settlor or the beneficiaries being physical persons, in the absence of a declaration of the Wealth tax.
• There is an obligation to declare the creation of the trust at the time of its constitution, or any modification or dissolution/liquidation, on January 1 st of every year. The neglect to declare wealth tax of the trust is sanctioned by a € 10,000 fine or by 5 % of the value of the assets of the trust whichever is the greater.

• A 25% withholding tax is applied to the sums paid because of any death from July 29th, 2011 if the distributed value paid to every beneficiary is superior to € 902,838. The amount inferior remains taxable at the rate of 20% after taking into account the € 152,500 allowance to the beneficiary.
• Life insurance policies taken out abroad before becoming tax resident are no longer exempt from these taxes.

• Taxation of the latent capital gains for the taxpayers transferring their fiscal residence outside France:
  - On securities and any of earn-out deals, except OPCVM.
  - When the participation represents more than 1 % of the capital of the company or when its valuation is superior to M€ 1.3.
  - Calculated on the value of the shares on the day before the transfer of the tax domicile.
• The rate of the taxation is that of capital gains on shares increased by social charges, that is currently 3'.3 %.
• This taxation is applicable for the departures outside of France as from March 3rd, 2011.