Definitively adopted by the Senate on February 6, 2025, the French Finance Act for 2025 includes several measures of interest to individual taxpayers. We have selected five to present.
#1 - INCOME TAX
Art. 10: The wealthiest tax residents will be subject to a differential contribution on the highest income (CDHR)
Only single taxpayers whose annual tax income exceeds 250,000 euros and taxpayers subject to joint taxation whose annual tax income exceeds 500,000 euros and whose tax rate is currently below 20% are concerned.
The reference tax income will correspond to an adjusted net taxable income. Products and income exempted under an international double-taxation treaty will be deducted from it, as well as products and income from new residents benefiting from temporary income tax exemptions.
The measure is designed to subject the wealthiest households to a minimum tax of 20% (excluding social security contributions). Concretely, the contribution will be equal to the difference between 20% of the retired net taxable income and the amount resulting from the sum of the income tax, the exceptional contribution on high incomes, and final withholding taxes paid, increased by 1,500 euros per dependant and 1,250 euros for taxpayers subject to joint taxation.
The scheme is presented as temporary, limited to fiscal year 2025. An advance payment representing 95% of the estimated contribution will be due between December 1 and 15, 2025.
#2 - INCOME TAX
Art. 84: Changes to the regime for non-professional furnished rentals (LMNP)
To determine the capital gain derived from the sale of a property let on a non-professional furnished rental basis, LMNP will now have to add back any depreciation deducted during the rental period. In practice, this means deducting depreciation from the purchase price of the property, which will increase the taxable capital gain accordingly.
This measure will apply to capital gain realized from the day after the enactment of the French Finance Act for 2025.
#3 - TRANSFER DUTY
Art. 71: Exemption for family gifts earmarked for a real estate project
Money gifts made to a child, grandchild, great-grandchild or, in the absence of such a descendant, a nephew or niece, will be exempt from free transfer duties up to a double limit of 100,000 euros by the same donor to the same done, and 300,000 euros per done if the sums are allocated by the latter within six months to the acquisition of a property purchased new or in a future state of completion, or to certain energy renovation work on his or her principal residence.
To benefit from this measure, the property must be kept as a principal residence for 5 years.
The measure will apply to money gifts made from the day after the enactment of the French Finance Act for 2025 until December 31, 2026.
#4 - AUDIT
Art. 61: Extension of the tax authorities’ time limit to requalify the tax domicile of non-residents
To combat fictitious tax domiciliation, the tax authorities will have a 10-year recovery period to challenge a foreign tax residence.
This new time limit will apply to income tax, wealth tax and transfer duty from the day after the publication of the French Finance Act for 2025.
The explanatory memorandum specifies that recovery periods expiring on or after the entry into force of the French Finance Act for 2025 will be extended accordingly.
#5 - AUDIT
Art. 60: Introduction of a simplified tax audit procedure
A simplified tax audit procedure has been introduced for income tax to combat false declarations made to benefit from a tax credit or a refund of the withholding tax.
In the presence of serious evidence that may call into question the accuracy of the taxpayer’s declarations, the tax authorities may, before assessing the tax, ask the taxpayer for any information that might justify these declarations.
If the taxpayer fails to reply within 30 days, or if his reply is insufficient, the tax assessment will be made without taking his declarations into account.
Conclusion
Many of the measures announced were ultimately shelved, such as the increase in the flat tax on capital income, the reduction in the Dutreil allowance, the restoration of the ISF under the new name of “Impôt sur la fortune improductive” (tax on unproductive wealth), and the reform of the basis of assessment for transfer duty on transfers of shares in French real estate-rich companies.
