French households will have to pay more in wealth tax as the result of the French government’s latest instruction.
According to the new rule, interest derived from euro fund life insurance policies, whether mono- or multi-based, is to be taken into consideration in future when calculating the cap on wealth tax (ISF).
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Currently, ISF, income tax, the general social contribution (CSG), and the contribution for the repayment of social debt (CRDS) are capped at 75% of income. If the amount of tax due exceeds this threshold, a taxpayers’ wealth tax bill is subsequently reduced accordingly to respect the regulation.
The French government, which is determined to prevent abuse of the system and to increase fiscal revenues for the state, now intends to integrate into the cap calculation, interest generated by low-risk euro fund life insurance policies.
The government’s move is expected to have a considerable impact on wealthy taxpayers in France, given that the majority of the 7,000 taxpayers currently subject to ISF, and benefiting from the wealth tax cap, will have life insurance contracts.
However, the government’s decision was opposed by the experts, who insist that it is simply unacceptable to include in the "tax shield" income that a taxpayer has not as yet received. The Constitutional Court censured the government plans at the end of 2012 to take into account latent income when calculating the cap.
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By GlobalData
