INDIVIDUAL TAXATION

French residents are taxed on their global income.

French residents are taxed on a household basis, at progressive rates. The mode of calculation is somewhat strange, and emphasizes the familial nature of French society. The household's net taxable income is divided by the number of family members, calculated according to the so-called 'family coefficient rules' (e.g., a two parent family with two dependent children would result in the gross family income being divided by 3. The figure arrived at is taxed at the scale rates. Then the resulting amount is re-multiplied by whatever number was arrived at.

INCOME TAX

The following income tax rates apply for income earned in 2007:

INCOME TAX
ANNUAL INCOME (€)	MARGINAL TAX RATE
Up to €5,687	nil
€5,688 - €11,334	5.5% on band over €5,687
€11,334 - €25,195	14% on band over €11,334
€25,196 - €67,546	30% on band over €25,195
Over €67,546	40% on all income over €67,546
Source: Global Property Guide

Wealth Tax

Wealth tax is an annual tax that applies once French assets exceed €770,000.

WEALTH TAX
TAXABLE AMOUNT (€)	MARGINAL TAX RATE
Up to €770,000	nil
€770,000 - €1,240,000	0.55%
€1,240,000 - €2,450,000	0.75%
€2,450,000 - €3,850,000	1.00%
€3,850,000 - €7,360,000	1.30%
€7,360,000 - €16,020,000	1.65%
Over €16,020,000	1.80%
Source: Global Property Guide

TAX INCENTIVES
Special tax offsets are available for individuals investing in the French overseas departments and territories, including the 'Loi Girardin,' which concerns new or remodeled dwellings.

Beneficiaries must be tax-resident in France.

Loi Girardin - for individuals. Investors must either:

• live in the property as their main home for at least five years after purchase, or
• rent out for five years after purchase, or
• invest in a company or society putting up buildings in the overseas departments and territories for rental for at least five years.

The maximum incentive is 64% of the building's cost, and can be deducted from individuals' tax payments:

• Over five years for an investment in a rental property
• Over ten years for buying one's principal home

The tax reduction is limited to €1,953 per sq. m (2005), and amounts to:

• 25% of the cost of a dwelling intended to be the buyers' home
• 40% of the cost of a dwelling intended for rent on the free market
• 50% of the cost of a dwelling intended for rent to tenants for less than certain higher limits.
• plus 10% if the dwelling is in a town
• plus 4% if the swelling is equipped with renewable energy systems
• To a maximum of 64% of the building's cost.

CAPITAL GAINS TAX

New rules were introduced in 2004. EU residents and residents of France now pay 16% on the net gain, after deduction of acquisition and improvement costs (the default deductions under these two headings are 7.5% and 15% respectively, but if invoices can be produced, more may be allowable). For both residents and nonresidents, discounts of 10% a year are allowed after the fifth year of ownership, with the effect that after 15 years no gain is chargeable to tax.

Properties which have been used as a principal residence from the date of purchase, or for a minimum of five years, are exempt from CGT.

French residents pay an extra 11% over and above the CGT, in French National Insurance, making their effective CGT rate of 27%. Old age pensioners and invalids, even if nonresident, are exempt from CGT.

Those who own their properties through a Société Civile Immobilière (SCI) (which is not subject to corporation tax) are, as shareholders, individually liable for payment of CGT. This also applies to companies subject to French corporation tax, though in addition, for such companies the purchase price will be reduced in value by 2% every year.

The Notaire instructed to act on the sale is a public official, and as such he is obliged to act as the tax collector, and will withhold the tax due on the gain.

PROPERTY TAX

Property Taxes

There are two types of property taxes in France, the taxe d'habitation and the taxe foncière. Whoever actually resides in a building is obliged to pay the tax d'habitation. Generally, rental leases also provide that the tenant will reimburse the landlord for the taxe foncière, which is otherwise payable by the owner of the property. The tax foncière is a combination of tax for the building (taxe foncière bâtie) and for the land (taxe foncière non bâtie).

CORPORATE TAXATION

INCOME TAX

Corporate tax applies automatically to sociétés anonymes, sociétés par action simplifiées, sociétés a responsabilité limitée, sociétés en commandite par actions, and some co-operatives. Corporation tax may also apply to other bodies, such as sociétés civiles, and even to sociétés de personnes (partnerships), according to the nature of their business.

For enterprises of less than €7,630,000 turnover and with profits of less that €38,120, corporation tax on profits is 15%. Such corporations also do not pay the social contribution on profits. However, with some exceptions, if a company owns real estate in France, it will have to pay a 3% annual tax based on the property's market value.

TAX INCENTIVES
Special tax offsets are available for corporations investing in the French overseas departments and territories.

Loi Paul

Companies domiciled in France which pay corporation tax can recoup 100% of investments in the overseas departments and territories as tax rebate, if they invest in new productive investments lasting at least five years in industry, fishing, the hosterly business, tourism, new energy sources, audiovisual information services, BTP, du transport et de l'artisanat. This can include property investments if, again, they are subject to a rental contract of at least five years.