Finance Bill 2024: between good news and bad surprises for individuals!

Measures with a positive impact … :

1 . An inflation-linked increase of 4.8% in the tax scale and the thresholds and limits indexed to the tax scale (such as the decote and the abatement). This will potentially offer a tax cut for those whose income has not kept pace with inflation. These changes will apply to income tax payable for 2023 and subsequent years;

2. The individualized rate will become the norm for married couples or those in a civil solidarity pact (PACS), subject to joint taxation – from 1/1/2025;

3. Tax reduction schemes will be extended, giving taxpayers more time to benefit from them:

• The “Denormandie dans l’ancien” scheme has been extended until 31 December 2026. This scheme gives entitlement to a reduction in income tax on the purchase of older homes that have undergone improvement or conversion work representing at least 25% of the total cost of the transaction.
• The Sofica tax reduction for investment in the film industry will also be extended unchanged until the end of 2026.
• The tax credit for work to prevent technological risks will also be extended until the end of 2026.
• The 75% “Coluche” tax reduction for donations should also be extended and strengthened:
  • its increased payment ceiling of 1,000 euros per year per household in force between 2020 and 2023 should be extended between 2024 and 2026
  • its increased rate of 75% should be extended to donations made to the Fondation du Patrimoine until the end of 2025, up to a limit of €1,000 per year. These donations are intended for the restoration of religious buildings in small towns. It should be remembered that these donations are normally eligible for a tax reduction of only 66%.

4. For investors, subscribing to shares in SMEs, FCPIs or FIPs should continue to give entitlement to a 25% tax reduction until the end of 2025 (30% for “Corsica” and “overseas” FIPs), instead of the standard 18% reduction.

5. Increase in the tax credit ceiling for charging systems for electric vehicles in primary or secondary residences to 500 euros per item of equipment for expenditure paid in 2024 and 2025;

6. Extension of the IR-PME scheme for subscriptions to the capital of young innovative companies between 2024 and 2028, i.e. a tax reduction of 30% or 50%, capped at €50,000 per household over the entire period of application.

7. Temporary incentive for donations to restore religious buildings until 31/12/2026 (75%, capped at €1,000).

8. Extension of the scope of the tax reduction for life annuity contracts.

9. Extension of the scope of the 66% reduction to feminist associations.

• Property and council tax will also benefit from “tax relief”:
• Property tax exemptions for energy-efficient housing have been updated.
• Creation of a housing tax rebate for non-residents urgently called upon to return to France.

… and those that penalise taxpayers!

1 . The tax credit for the installation of equipment for the elderly or dependent persons will be extended but with stricter criteria, in particular a means test for beneficiaries.

2. With regard to exit tax, if a taxpayer fails to file a tax return within the prescribed timeframe for an event giving rise to exit tax relief or restitution, the deferred tax will become payable immediately. This measure will apply to failures to file returns relating to the items needed to calculate the income tax due in 2024 on income from 2023, if the event that led to the exit tax relief/restitution occurred prior to the entry into force of the 2024 Finance Act.

3. Taxpayers eligible for the IFI risk seeing their tax base increased – This measure will apply to the IFI due from 2024:

• Introduction of a principle of non-deductibility of debts relating to a non-taxable asset: the law broadens the scope of the anti-abuse mechanism in order to put an end to tax optimization strategies consisting of creating liabilities unrelated to a taxable asset in order to artificially reduce the taxable value of the company.
• Creation of a ceiling: The new rule excluding debts not allocated to taxable assets is accompanied by the creation of a ceiling on the taxable value of shares, designed to preserve the taxpayer’s ability to pay tax and to prevent him from being taxed on a value exceeding the real value of the assets he holds.

4. The rules for taxing furnished tourist accommodation under the micro-BIC scheme have been adjusted and tightened! Although the government has admitted to having made a “mistake”, the maximum threshold for application of the micro-BIC scheme for all tourist lettings will now fall to €15,000, compared with the previous threshold of €77,700 for unclassified furnished tourist accommodation and €188,700 for classified furnished tourist accommodation. As a result, this reduction in the tax-free allowance could lead to an increase of almost 40% in the taxation of hirers of meublé tourism under the micro-BIC scheme and could induce a large number of hirers to switch to the real BIC scheme.

Note: The government has announced its intention to legislate for an exemption from these new thresholds for the 2023 tax year.

* If income from ALL furnished rentals (tourist or otherwise) does not exceed €15,000 in the previous calendar year. Otherwise, the 30% allowance remains applicable, if income from the classified meublé de tourisme alone does not exceed €15,000.