Concerning individuals, the project presented by the government plans to revalue the brackets of the income tax scale by 2% to take into account inflation. This revaluation of the different sections of the scale applicable to income for the year 2024 is accompanied, as every year, by an revaluation of certain thresholds and reductions in the same proportions.
In addition to this revaluation, the main provision of the finance bill affecting individuals concerns the establishment of a differential contribution on high incomes.
This provision actually creates a minimum income tax liability of 20% for taxpayers resident in France who have an income greater than €250,000 (single individuals) or €500,000 (couples subject to joint taxation).
These thresholds are also those which are applicable for the exceptional contribution on high incomes (CEHR) in force since the taxation of income for the year 2011. Remember that the CEHR is calculated at the rate of 3% on the share of income included between €250,000 and €500,000 for a single person and on the share of income between €500,000 and €1,000,000 for subject couples to common taxation. The CEHR rate is increased to 4% for the portion of income which exceeds €500,000 for a single person and €1,000,000 for a couple subject to joint taxation.
The differential contribution on high incomes will be, like the CEHR, calculated on the reference tax income. Taxpayers whose income tax and CEHR amount is less than 20% of their reference tax income will have to pay the difference as part of this new contribution.
The text presented by the government provides that this exceptional contribution will apply for 3 years, that is to say for the taxation of income for the years 2024, 2025 and 2026.
On a practical level, this contribution should not concern taxpayers whose majority of income is subject to the income tax scale since their effective tax rate is already higher than 20%.
Conversely, this contribution should concern taxpayers who have income taxed at a flat rate such as dividends.
Indeed, let us recall that dividends are in principle taxed at the flat-tax rate of 30% which breaks down into 12.8% flat-rate taxation for income tax and 17.2% for social security contributions. To these rates is added the CEHR for taxpayers who are liable, so that, for them, the marginal tax rate of a dividend could reach 34%.
For these same taxpayers, with the differential contribution mechanism, the marginal tax rate of a dividend would increase to 37.2% (12.8% flat rate IR + 4% CEHR + 3.2% contribution differential to reach the minimum income tax of 20% to which are added social security contributions of 17.2%).
The same marginal tax rate of 37.2% should apply to capital gains on securities and social rights, unless they can be considered exceptional income.
In this regard, the text of the bill provides that income which by its nature is not likely to be collected annually and whose amount exceeds the average net income of the last three years will only be retained for a quarter of its value. amount in the basis for calculating the differential contribution.
Unfortunately, it results from a ministerial response of June 27, 1991 and a decision of the Council of State of June 15, 2005 that the capital gains generated within the framework of the management of a portfolio of transferable securities do not constitute a exceptional income.
Conversely, it seems to result from a judgment of the Council of State of November 23, 2020 and a ministerial response of June 9, 2016 that when a capital gain arises from a one-off operation which is not likely to be repeated annually, it can be considered as exceptional income.
It will therefore be necessary to wait for any clarifications which may be provided, during the parliamentary discussion or subsequently by the administration, regarding the notion of exceptional income to know whether the differential contribution is likely to apply to all the most -values on securities and corporate rights or only on some of them.
Finally, let us add that the text provides not to include in the base of the differential contribution which will be due for 2024 income, income from redemptions on life insurance contracts which have been subject to the withholding tax. Remember that only income from premiums paid before September 27, 2017 can still benefit from the withholding tax. This exclusion from the differential contribution base, limited to redemptions made in 2024, was undoubtedly planned so that the provision could not be censored by the Constitutional Council. Indeed, it results from a decision of the Constitutional Council rendered on December 29, 2012 that when an income has been subject to the withholding tax, it is not possible to retroactively reverse the discharge nature of a tax.
Regarding personal taxation, let us finally note that the finance bill modifies the rules for calculating real estate capital gains for people who rent furnished real estate on a non-professional basis.
Remember that renters whose income from furnished rental is less than either €23,000 per year or the other professional income of the tax household are considered non-professional.
Non-professional rental companies are, in the event of the sale of the rented property furnished, taxed according to the property capital gains regime for individuals and not under the professional capital gains regime. Under the regime of individuals, for the calculation of the capital gain, the cost price is not reduced by the depreciation which may have been deducted from the income derived from the furnished rental. The finance bill returns to this advantage and provides that non-professional furnished rental companies must, for the calculation of the real estate capital gain realized during the sale of the property which was rented, deduct from their cost price the amount of the depreciation which was deducted from rental income.
