The first term of Mr. Macron has seen the adoption of several major reforms in the personal tax field :
– Repeal of housing tax,
– Implementation of a 30% flat tax on investment income,
– Replacement of the net wealth tax by a net wealth tax on real estate property only.
In terms of corporate tax, some less spectacular but business friendly measures were taken, like the progressive reduction of the corporate income tax rate to 25% and the 50% decrease of the business local taxes.
With higher pressure on overall stability of public finance following the Ukraine conflict and the return of inflation, it is largely anticipated that the new president would have less flexibility. Nevertheless, some measures worth mentioning emerge from the reelected president agenda.
Personal tax
The measures in terms of personal income have been limited and mainly two-fold:
- reduction of non married couple tax burden by authorizing them to jointly declare their income and pay their taxes, thus benefiting in particular from certain advantages only available to conjugal partners so far;
- tripling of the ceiling for the so-called Macron bonus, a bonus that can be granted once a year by employers and are exempt from health insurance & pension contribution as well as personal income tax (this concerns however only lower income individuals).
Also, the focus of the election campaign has also been very much on gift and inheritance taxes, and Mr. Macron, like other candidates, has put forward certain proposals:
- an increase of the rebate on gift and inheritance to direct lineal descendants from 100,000€ to 150,000€;
- a new rebate of 100,000€ on gift and inheritance for all non direct lineal descendants (be it grandparent to grandchildren or uncle to nephew). This new rebate would really mean a significant change comparatively to existing rebates.
No measures concerning the much incertain tax treatment of management package were discussed during the campaign, due to the high technicality of the subject, but it can be anticipated that the point will be brought up in the next Parliament session.
Corporate tax
In the wake of the 50% decrease voted at the end of 2020 for application as from 2021, Mr. Macron’s reelection agenda reflects a plan to continue the business local taxes decrease, via a definitive repeal of its first branch, the so called CVAE (business tax on added value). This measure would have a significant impact on enterprises from labor intensive sectors, as the employee wages and social contributions are not deductible from the basis of the CVAE, but also on highly leveraged long term infrastructure projects.
The repeal of the CVAE would question its connection with the upholding of the CFE, the second branch of business local tax which affects in particular the businesses in commercial and industrial sectors that require an extensive land footprint (be it owned or leased) for the carrying out of their activities. In many cases, the repeal of the CVAE would generate tax savings for these businesses if and only if the general cap on business local taxes is accordingly decreased at a ceiling below the 2% currently applicable. Please also note that the reelected president agenda does not include anything about a potential decrease of property tax.
This repeal may be submitted to the Parliament as soon as from the beginning of September, with an entry into effect, if enacted, for fiscal years opened as from 1st January 2023. It is anticipated that this proposal will be heavily debated, as the 50% rebate was, due to its direct impact on local government financing. The business valuation on a discounted cash-flow basis, for existing and future projects, will have to be adjusted to reflect that decrease once voted.
