The annual Finance Law has now been published. Some of the major changes of consequence for French property owners / purchasers are outlined below:

Income tax
The income tax bands applicable to income earned in 2004 have been altered as follows:

0% on income earned up to 4,334 Euros (formerly 4,262 Euros)
6.83% between 4,334 Euros and 8,524 Euros (formerly 8,382 Euros)
19.14% between 8,524 and 15,004 Euros (formerly 14,753 Euros)
28.26% between 15,004 Euros and 24,294 Euros (formerly 23,888 Euros)
37.38% between 24,294 Euros and 39,529 Euros (formerly 38,868 Euros)
42.62% between 39,529 Euros and 48,747 Euros (formerly 47,932 Euros)
48.09% over 48,747 Euros (formerly 47,932 Euros)

The above bands are applicable to the net taxable income following deduction of allowable expenditure, reliefs and allowances depending upon the nature of the income earned and the individual family circumstances.

PACS
PACS is an agreement between unmarried people concerning the ownership of their joint assets. When the PACS was originally introduced, a number of tax advantages were also introduced. e.g. additional personal allowance, possibility of joint declaration, special inheritance and gift tax free band and rates.

The former requirement that the PACS had to reach its third anniversary before the partners could benefit from tax advantages has been deleted from the Finance Law for 2005. Therefore any tax advantages are applicable immediately. If the agreement is terminated for reasons other than marriage or the death of a partner during the year of its conclusion or the subsequent year, any advantages are similarly retrospectively lifted.

Inheritance tax
A tax free band of 50,000 Euros has been introduced applicable to the net value of the inheritance received either by the living or represented children or the surviving spouse. This is very good news indeed and makes a significant difference to many.

Using a very basic example, it means that in a situation where there is a spouse and two children who have inherited 1/3rd each and the value of the inheritance totals 150,000 Euros, the taxation position will be as follows:
150,000 € less 50,000 € tax free = 100,000 € potentially liable
100,000 € ÷ 3 = 33,333 € each, which will be fully covered by the tax free bands available to a spouse and children. Therefore there is no inheritance tax to pay.

Before the new tax free band’s introduction, the position would have been as follows: 150,000 € ÷ 3 = 50,000 € each. The spouse would have been covered by their tax free band of 76,000 € but the children would have been liable to a small amount of tax as they would not quite have been covered by their tax free band of 46,000 € each.

Clearly, on larger estates the new band is even more beneficial. The tax free band for children inheriting from parents, or grand-children inheriting from grand-parents where the parents are have pre-deceased the parents has been altered from 46,000 Euros to 50,000 Euros.

Television licence
As widely expected, the television licence has been replaced by a tax called 'redevance audiovisuelle', to be collected as part of the general 'taxe d'habitation'. This will be 116 € and payable by those persons who on the 1st January hold a television set in a premises situated in France. No TV licence dodging in France!