France Clarifies Regulations Pertaining to the Wealth Tax Cap

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The French Finance Ministry has clarified regulations pertaining to the wealth tax cap (ISF) and life insurance contracts. It has also announced that the deadline for filing "corrective" ISF tax declarations is October 15.

Currently, ISF, income tax, the general social contribution (CSG), and the contribution for the repayment of social debt (CRDS) are capped at 75 percent of income. If the amount of tax due exceeds this threshold, a taxpayers' wealth tax bill is subsequently reduced accordingly to respect the regulation.

Details of the specific income to take into account when calculating the ISF cap were published in the country's Official Journal on June 14 (BOI-PAT-ISF-40-60-20130614).

In its publication, the Tax Administration highlights the fact that annual income derived from capitalization contracts and bonds, as well as income generated from other similar investments, notably life insurance contracts taken out with insurance companies located in France or abroad, is now included within the scope of the ISF cap. This is as social levies are withheld each year on this type of income, in accordance with Article L 136-7 of the French Social Security Act (CSS).

In practice, this will mean that interest derived from euro fund life insurance policies, whether mono- or multi-based, is to be taken into consideration in future when calculating the ISF "tax shield."

Taxpayers in France subject to ISF this year should already have filed their ISF tax returns, as the final reporting deadline was June 17. Given that individuals might not have included revenue from life insurance contracts in their ISF cap calculations, the Government has fixed a deadline of October 15 for filing corrective returns.

Taxpayers are invited to submit a corrective declaration using the same form as before, namely either the declaration of supplementary income (form 2042 C) or the ISF declaration (form 2725), depending on the level of their assets.

The late filing of corrective declarations, and any additional taxes that may result, will not be subject to either late interest or penalty payments, provided that they are submitted before October 15.