Published on: October 18, 2024 | By: @rprasanth_kumar
The French National Assembly’s Finance Committee recently approved a proposal to raise the flat tax rate on capital gains from 2025. This measure came as a compromise after calls from some left-wing members to abolish the flat tax entirely, arguing that it primarily benefits the wealthy.
Background of Flat Tax in France
- The flat tax “prélèvement forfaitaire unique (PFU)” was introduced in 2018 under President Emmanuel Macron to simplify capital income taxation at 30%.
- It is a single rate tax that applies to income, such as interest, dividends and capital gains on financial investments.
- The 30% was a combination of 12.8% income tax + 17.2% social contributions.
- Critics, especially on the left, argued it disproportionately benefited the wealthy.
Proposed Increase in 2025
- The committee agreed to increase the income tax portion of the flat tax from 12.8% to 15.8%.
- So, 15.8% income tax + 17.2% social contributions, raises the total tax rate to 33%.
- This is expected to generate an additional €800 million in revenue each year.
Possible 35% Flat Tax for “Super Dividends”
Higher Tax for Large Companies
- In some cases, the flat tax could increase to 35%. A temporary 5-point increase was approved for companies that distribute dividends or buy back shares exceeding 20% of the average from 2017-2021.
- This higher rate would only apply in 2025.
Ongoing Discussions
- The proposal is not final yet, as it will undergo further debate in the National Assembly, where lawmakers may introduce stricter measures to generate more revenue.
- This is part of ongoing discussions about tax policy, with some members of the Assembly aiming to reform or raise taxes on capital income to address inequality.
Support This Blog!
If you’ve found my articles helpful, interesting or saving your time and you want to say thanks, a cup of coffee is very much appreciated!. It helps in running this website free for the readers.
