Tax on real and personal assets

Tax issues

♦ Tax on real and personal assets
Special cases on share exchanges
Public offer launches by BNP on Paribas'shareholders'equity
Public offer and merger launched on the shareholders'equity of Paribas and its subsidiaries

TAX TREATMENT OF SHARES (1)

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Tax treatment of distributions
- Tax treatment of distributions
  The information given below is applicable to distributions paid on or after 1st January 2010 (dividends paid in respect of the 2009 fiscal year, for tax due in 2011).
  
  Income distributed must be reported on the return of income, to which the copy of the tax declaration provided by the financial intermediary should be attached. If the shares are French shares - or non-French shares provided that the distributing company is based in a European Community State or has concluded a treaty for avoidance of double taxation with France(2) - the taxpayer may opt for one among the two following methods of taxation:
  a French fixed-rate dividend tax ["prélèvement forfaitaire libératoire" (PFL)],
  income tax at progressive rates on this income.
  The rate of fixed-rate dividend tax is 18%, or 30.1% including social security levies. These taxes are due on a base consisting in the amount of the distributed dividends, without taking into account neither custody charges nor any allowance. The paying bank must be informed of the choice for the fixed rate dividend tax at the latest at the time of the payment of the dividend. This information must be renewed for each payment. It is nevertheless possible to elect retroactively for the PFL until June 15th, 2010, for the dividends perceived in 2009.
  
  If income tax at progressive rates is opted for, the calculation of charge works as follows:
  an annual allowance of 40% of distributions;
  a deduction for depository fees;
  an annual allowance of €1,525 for single persons, widows/widowers or divorced persons, as well as for married couples electing for separate taxation, or €3,050 for married couples or civil partners electing for joint taxation;
  income tax at progressive rates; in addition to income tax, social security levies are added (CSG : 8.2%, CRDS : 0.5%, general social security levy of 2.3 %, RSA: 1.1%, making a total of 12,1 %) calculated on the basis of the amount of gross dividends received, before deduction of depository fees and before the two annual allowances. A fraction of the CSG social security levy (5.8%) is then deductible from the total income liable to tax;
  a tax credit reducing this liability: 50% of the dividend paid (before the allowances mentioned above), with a ceiling of €115 for single persons, widows/widowers or divorced persons, and of €230 for married couples or civil partners electing for joint taxation; this is offset from the amount of tax payable for the year in which the dividends are received.
  
  Please note: Opting for flat-rate dividend tax on some dividends will prevent the taxpayer benefiting from annual allowances or the tax credit in respect of other dividends received in the same year. Moreover, the fixed-rate dividend tax regime excludes the right to a deduction for part (5.8%) of the CSG social security levy.
  
  Social security levies on dividends are withheld at source by the paying organisation, whichever option the taxpayer elects for (fixed-rate dividend tax or progressive rate income tax). When the taxpayer chooses the taxation at progressive rates of his dividends, he must indicate their amount on his declaration n°2042, in the areas specified by the information document provided by his financial intermediary. The amount of the deductible CSG is then calculated by the tax Administration, which mentions it on the return of income which the taxpayer receives, the following year.
  
  In the special case where dividends are paid between the time of execution of the stock exchange trade order and the completion of the trade, the buyer is considered to be the shareholder from the day of execution of the order for purposes of application of the 40% allowance or for flat-rate dividend tax (even though for legal purposes ownership of the shares does not pass until completion of the transaction).
  
  Tax treatment is the same, whether the shareholder opts for payment in cash or payment in shares, where the latter is a possibility.
  
  (2) Starting from January 1st , 2009 and for companies established out of the European Union, the treaty must contain a clause of administrative assistance in order to fight against fraud or tax avoidance. Companies have to be liable to the “IS” (Corporate Income Tax) or an equivalent tax for the foreign companies.
Tax treatment of capital gains on disposals (excluding french approved share savings plans - Plan d'Epargne en Actions - "PEA" )
- Tax treatment of capital gains on disposals (excluding french approved share savings plans - Plan d'Epargne en Actions - "PEA" )
  The net capital gain (difference between the selling price - net of fees and taxes - and the purchase price - uplifted for costs of acquisition) realised on sale of shares must be shown on a specific return (no. 2074) attached to the return of income. However, as far as the income tax is concerned, this is not taxable - nor need a return be filed - unless the overall amount of securities sold exceeds a certain threshold, set for example at €25,730 for the 2009 fiscal year, and increased to €25,830 for sales made on or after 1st January 2010: the calculation of the threshold includes the expenses of sale (basically brokers' fees), even though the capital gain is measured "net of transaction costs". Moreover, this threshold is reviewed upward annually, in proportion to the upper limit of the first income tax band for the year preceding the sale.
  
  If it is taxable, the capital gain is taxed at an overall rate of 30.1% which includes, as well as proper income tax (flat rate: 18%), social security levies (CSG : 8.2%, CRDS : 0.5%, general social security levy of 2.3 %, RSA:1.1%), amounting to 12.1% in total. As from the sales that have occurred since January 1st, 2010, the taxpayer must pay the social security levies as of the first euro.
  
  ALLOWANCE FOR LENGTH OF OWNERSHIP
  
  As of 1st January 2006, a system of progressive exemptions for certain capital gains on sale of securities by individuals was put in place, working on the basis of the length of time the securities had been held.
  This exemption is achieved by means of a reduction by one third of the capital gain per year of ownership of the securities beyond the 6th year, which results in complete exemption from capital gains made on securities held for over eight years.
  Regardless of the date that the share account was opened, the exemption applies only to capital gains arising on individual securities within it - taken in isolation - held for over 8 years; this is a notable difference from approved share savings plans [PEA], where the tax treatment depends entirely on the date that the plan was opened.
  This exemption does not cover social security levies, which remain due on the whole capital gain realised by the shareholder.
  
  Capital gains covered
  The gains covered are gains on disposal for valuable consideration, made directly or indirectly, on units or shares held in full beneficial ownership or on separated rights (life interest, remainder). The securities involved may be held either in registered or bearer form.
  Note: this exemption does not apply to gains arising from exercise of stock-options, nor to gains on disposal of units or shares in OPCVM mutual funds.
  
  Main conditions for application
  1. Calculation of length of ownership
  Principle: the length of ownership of the securities sold is counted from 1st January of the year in which they were purchased or subscribed for.
  Exception: the length of ownership is counted only from 1st January 2006 for securities acquired or subscribed for before that date (this means that the first one-third allowance will apply only to sales made on or after 1st January 2012 and that total exemption will only be achieved for sales made on or after 1st January 2014).
  However, on retirement, SME directors may under certain conditions benefit from exemptions on their securities acquired or subscribed for before 1st January 2006.
  
  2. The special case of sales of securities acquired through a series of transactions at different dates
  It is now compulsory to apply the "First In First Out” (FIFO) method to determine the length of ownership of the securities: the securities deemed to have been sold are those that were acquired or subscribed for earliest.
  Conversely, as was previously the case, the acquisition cost is determined by applying the "average weighted purchase price" method.
  
  In the case of a capital loss, the shareholder may offset it against capital gains made in the same year or in the following years, with a maximum carry forward of ten years. Nevertheless, for these capital losses to be offset, sales must have exceeded the taxable threshold for the year during which the capital losses were realised; this latter condition is not necessary regarding the offsetting of corresponding social security levies.
  
  Moreover, the tax liability for capital gains made on amalgamations, mergers, spin-offs or similar may be deferred; under this measure, the return of capital gains is made only once, at the time of the ultimate sale of the securities acquired. The amount of the capital gain to be returned will therefore be equal to the difference between the selling price of the shares acquired on exchange, and the original cost price of the shares contributed to the share exchange.
Transmission of family assets
- Trasnmission of family assets
  Gifts enable you to pass down moveables - including shares - as well as immoveable property.
  
  Every six years, these gifts benefit from an exemption of €156,974 euros (per parent and per child) where they are made to children or to parents, and also to handicapped persons. For handicapped persons, the two exemptions can be combined, making €313,948. Gifts between spouses and civil partners qualify for an exemption of €79,533. An exemption of €15,697 applies to gifts between brothers and sisters.
  
  For gifts between nephews and nieces, an exemption of €7,849 applies. For gifts to great-grandchildren, it is €5,232. Gifts of sums of money, made by persons aged under 65 to their children, grandchildren, and great-grandchildren, are exempt to a limit of €31,395.
  
  Moreover, in the case of gifts arising from stock-options, the capital gain at vesting will now be taxable in the hands of the donor. This measure is however applicable only to options granted on or after 20 June 2007.
Special case of BNP Paribas shares held within a PEA approved share savings plan
- Special case of BNP Paribas shares held within a PEA approved share savings plan
  The PEA approved share savings plan is a special share account, allowing individuals resident in France for tax purposes to invest, on tax-advantageous terms, in;
  shares of companies based in France or in other European Economic Area states, excluding Lichtenstein,
  in venture capital or innovation mutual funds (FCPR or FCPI),
  and in SICAV mutual fund shares and units of mutual funds eligible for inclusion in the PEA approved share savings plan. SICAV mutual funds and mutual funds eligible for inclusion in the PEA approved share savings plan can include European securities (as well as Norwegian and Icelandic ones from 1st January 2005) as part of the investments they are allowed to hold.
  If the "normal" expected duration of a PEA approved share savings plan is 8 years, tax advantages start to accrue from the end of the fifth year of the plan.
  From 1st January 2003, investment in cash was raised to €132.000 per plan (married couples can open two plans), giving a maximum investment limit of €264,000 for a married couple electing for joint tax treatment. Dividends from securities held in PEA approved share savings plans can only be paid into the plan; they are added to capital free of tax (for listed securities).
  
  If the account holder makes no withdrawal before the end of the fifth year, shares held in the PEA approved share savings account will be completely exempt from tax (but not from CRDS and CSG levies calculated by bands) on the gains realised and the investment income received. Furthermore, if a PEA approved share savings plan which is closed after more than 5 years returns a capital loss, it is possible to offset this loss against gains made on any share account during the same year or in the ten years following.
  
  Shares of companies based in a European Community member state, received in exchange for quoted shares held by the plan, as part of an amalgamation, merger, spin-off or similar operation, may also be held by PEA plans.
  
  Important note: making gifts of securities held in the PEA approved share savings plan before the end of the fifth year will result in the closure of the plan and a tax charge on the net gain realised, since the gift is considered as an early withdrawal of the securities concerned. If the gift is made between the end of the fifth year and the eighth year, it will result in closure of the plan, but the net gain realised since opening the plan will not be liable to tax (but is liable to social security levies). If the gift represents only a partial withdrawal from the PEA approved share savings plan and happens after the end of the eighth year, the plan will not have to be closed.
Non-residents
- Non-residents
  Profits distributed by French companies to non-residents are subject to withholding tax at a maximum rate of 25% (this rate is reduced, subject to certain conditions, to 18% for European Union residents). However, these withholdings may be reduced or even removed all together by the effect of international tax treaties.
  
  This is particularly the case where the legislation provides that only the state in which the beneficiary is resident may tax dividends received by the beneficiary*..
  
  As far as capital gains on moveables are concerned, persons who are not resident in France for tax purposes are expressly exempted from any tax charge in France (subject to certain conditions being met).
  
  *However, whatever the place of residence of the beneficiary, a withholding tax of 50% will be applied when the dividends paid from March 1st, 2010 on, are received out of France, in a State or a territory non cooperative.