Interest

Before 2013, income from investments such as bank savings accounts and government bonds could be taxed at the source at a rate of 24%; this was called the "Prélèvement Forfaitaire Libératoire" – the PFL. However, interest could also be declared in the annual tax return.

The fixed rate option was abolished on January 1, 2013. Income is now assessed according to the marginal rate used to determine your income tax liability, and your investment income is considered part of your total income.

However, the interest you earn in France will be subject to a 24% tax at the source. This reduces the time lag when collecting revenue. The actual amount to pay will be assessed on the following year's tax return.

Nevertheless, you can ask your bank to waive this withholding tax. To benefit, your previous year's net income must not exceed €25,000. For a couple, it must not exceed €50,000.

You will also have to settle some social security contributions, which are deducted at the source at a rate of 15.5%. The CSG social charge is deducted from income tax. The used rate in this case is 5.1%.
Tax breaks can be offered for some regulated bank savings accounts. Such accounts are not subject to income and payroll taxes.

Dividends

Generally speaking, the same rules apply to dividends and other savings income.

Important As of 2013, it is no longer possible to apply the withholding tax of 21% if income from such savings and dividends exceeds €2,000 annually. The income is included in your total income and the tax liability is calculated based on your marginal tax rate. You must also pay the corresponding social charges.

In this case, CSG social charges are deducted against income tax at a rate of 5.1%.

Interest earned in France, however, is subject to 21% taxation at the source. This is levied to reduce the time lag, as the actual amount to be paid is assessed and included in the following year's tax return. You may request that this withholding tax be waived if your previous year's net income was under €50,000 (€75,000 for a couple).

Most owners of equity shares who opt for dividends must pay social charges on these dividends; the average rate is 45%.

Social security contributions are collected from the gross dividend. They are therefore calculated and deducted before applying the 40% reduction for dividend income.

Except for certain categories of professionals, dividends are also subject to payroll taxes. As of January 1, 2013, these social charges were changed to company owners and members of their families whose dividends exceed 10% of the company share capital. If the fraction does not exceed 10%, social charges of 15.5% are deducted.

Shares

As of 2013, capital gains on the sale of shares are taxed along the same lines as income tax. Tax relief varies according to the number of years the shares have been held.

For shares held between 2 and 8 years, relief is calculated at a rate of 50%. This rate increases to 65% for shares owned for 8 or more years. No relief – for either taxes or social security contributions – is granted for shares held under two years.

Many tax-saving schemes are available in France: from life insurance to mutual funds and company savings plans (Fonds Communs Placement, Plan d'Epargne Populaire, Plan d'Epargne d'Entreprise, and Plan d'Epargne en Actions).

A minimum investment term is required for these schemes. If you withdraw before the authorized date, all tax benefits will be lost. You should also consider the access and exit fees associated with these tools.

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