French budget update – 2021

The French projet de loi de finances (PDLF) for 2021 has been presented to the French parliament. It includes the tax changes that the French government is proposing. Some of these tax changes are standard updates (such as the thresholds for the income tax bands) but also some new tax laws. Below is a summary of the main changes that are of interest.

Income tax

The income tax rates for 2020 income and the tax band thresholds had already been decided last year. This included changes compared to previous years with the rate for the second tax band dropping from 14% to 11% and the size of the bands being modified. The tax band thresholds are inflation-linked, and the amounts decided last year are to be increased by 0.2% for 2020 income. The table below shows the proposed rates and thresholds for 2020 as well as 2019 for comparison.

2020 income 2019 income
Taxable income Rate Taxable income Rate
between €0 and €10,084 0% between €0 and €10,064 0%
between €10,084 and €25,710 11% between €10,064 and €27,794 14%
between €25,710 and €73,516 30% between €27,794 and €74,517 30%
between €73,516 and €158,122 41% between €74,517 and €157,806 41%
above €158,122 45% above €157,806 45%

The amounts in the table are for a foyer fiscal with family quotient of 1 part (single person). For a foyer fiscal with family quotient of 2 parts (e.g. married couple/civil partners with no dependants), the tax bands are doubled.

25% uplift in profit for certain businesses to be phased out

Businesses taxed under the régime réel that do not use accredited accountants for their bookkeeping are required to uplift their taxable profits by 25%. This rule is proposed to be phased out over the coming years as follows:

  • 2020: 20% uplift
  • 2021: 15% uplift
  • 2022: 10% uplift
  • 2023 onwards: no uplift

Monthly interest rate on overdue taxes will be fixed at 0.2%

The monthly interest rate applied to tax paid late was reduced temporarily from 0.4% to 0.2% for the period 1 January 2018 to 31 December 2020. The monthly interest rate will now be fixed at the lower 0.2% level permanently.

Changes to the crédit d’impôt pour la transition énergétique (CITE)

It was announced previously that the crédit d’impôt pour la transition énergétique (CITE) would be replaced by a grant system dubbed MaPrimeRénov. The aim of both CITE and MaPrimeRénov is to encourage people to make green energy changes to their property.

MaPrimeRénov is means-tested grant which is available for qualifying green energy expenditure from 2020. However, the CITE is still applies in 2020 for two types of expenditure not covered by MaPrimeRénov. As with most tax credits, they are only available to French residents and in addition the expenditure must be for your main home.

Renewable energy

A fixed tax credit of €600 for expenditure on equipment for heating and hot water that uses wood, biomass or solar energy.

Electric car charging points

A 75% tax credit against the cost of installing electric car charging points at you main home. The tax credit is limited to €300 per point and is available for one charging point for a single person or two charging points for a couple. The cost must be invoiced between 2021 and 2023. The charging points will need to meet certain technical specifications which are to be published.

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