Reader question: Regarding the reporting of capital gains on shares, are there still allowances for holding shares for a certain number of years? I believe there are options as to how to declare them, but I’m having trouble understanding. Can you clarify? AW
Indeed, it is now possible to have income tax applied at a flat rate of 12.8% instead of the graduated rate system, both on income from shares and on capital gains.
Social charges of 17.2% remain due in all cases, although they are reduced to 7.5% for those attached to the social security system of the United Kingdom or another EU country/ EEE, such as British State pensioners living in France.
Read more: How do I report my UK government income on the French tax form?
The main issues in choosing taxation under either the bracket rate system or the flat (fixed) rate are:
- The election to apply the flat rate applies to both tax on investment income and investment capital gains in the tax year;
- If you choose the package, the tax applies to gross income, so with dividends you lose the use of the 40% allowance;
- Similarly, if you choose the package, you lose the use of capital gains allowances.
You have to be careful, because the flat tax of 12.8% is not to be compared to your highest tax rate, but to the average tax rate you pay on all your income and more- values.
So when it comes to selling stocks, yes, there are still discounts for selling after holding them for several years.
- 50% reduction for holdings between two and eight years;
- 65% reduction for holdings over eight years old.
The flat rate will apply unless an election is made to use the incremental rate system instead.
Banded rates are chosen by ticking box 2OP of the main blue form 2042 at the bottom of page 3.
The income tax filing deadline is approaching – seven rules explained
Checklist: Income tax in France 2022 (for 2021 income)
Do I have to file a French tax return if I only receive a British police pension?
How to find and download the French income tax declaration form?