Key takeaways

On September 28, 2012, the French government released its draft budget for 2013, which will be discussed and amended by the Parliament during the coming months. The draft budget contains significant tax increases for individuals and companies:

• Measures targeting individuals include:
  • the creation of an additional 45% tax bracket, and of an additional 18% temporary contribution on professional income above €1,000,000;
  • the inclusion of financial income, capital gains and acquisition gains on stock options and free share grants in the overall income subject to progressive tax rates;
  • the taxation of carried interest income and gains as compensation income;
  • a return to wealth tax rates similar to pre-2011 rates.
• Measures targeting companies include further restrictions on the deduction of interest expenses, which would be limited to 85% of their amount in 2013, and 75% as from 2014, an increased taxation of long-term capital gains, and further limitations on the ability to use carried forward tax losses.