Rosemont Consulting is pleased to report the latest tax and legal news which is likely to impact on those who have business or private interests in our part of the world.
FRENCH TAX UPDATE
On 17th August, the French Amended Finance Act 2012 was published and confirms most of the reforms described in our July tax briefing. The alteration of the deadline to declare a trust in France might affect you.
Inheritance and Gift Tax Changes (which entered into force on the 17th August 2012)
• Lowering from € 159,325 to € 100,000 the allowance applicable to gifts and inheritances in a direct line on the part of each ascendant and child;
• Increasing from ten to fifteen years the deadline for tax recall of the donations made between the same individuals.
2012 Wealth Tax
Net wealth that exceeds 1.3 million euros will be subject to an additional tax to be paid before 15th November 2012. The additional tax will be calculated on last year’s progressive wealth tax rates.
Tax payers, whose net assets are between 1.3 million euros and 3 million euros, will simply receive a notice in October that includes the amount of the additional wealth tax (assuming the wealth tax return was completed when it was due). For those tax payers with assets of over 3 million euros, a specific return for the additional tax will be sent to them in October.
FRENCH TAX UPDATE
On 17th August, the French Amended Finance Act 2012 was published and confirms most of the reforms described in our July tax briefing. The alteration of the deadline to declare a trust in France might affect you.
Inheritance and Gift Tax Changes (which entered into force on the 17th August 2012)
• Lowering from € 159,325 to € 100,000 the allowance applicable to gifts and inheritances in a direct line on the part of each ascendant and child;
• Increasing from ten to fifteen years the deadline for tax recall of the donations made between the same individuals.
2012 Wealth Tax
Net wealth that exceeds 1.3 million euros will be subject to an additional tax to be paid before 15th November 2012. The additional tax will be calculated on last year’s progressive wealth tax rates.
Tax payers, whose net assets are between 1.3 million euros and 3 million euros, will simply receive a notice in October that includes the amount of the additional wealth tax (assuming the wealth tax return was completed when it was due). For those tax payers with assets of over 3 million euros, a specific return for the additional tax will be sent to them in October.
Social Contributions for Non-ResidentsIncome derived by non-residents from immovable property situated in France will be subject to social contributions at the standard rate of 15.5%.
It means that for a non-French resident, tax on rental income will rise from a lower rate of 20℅ to 35.5℅. The capital gains tax on property sales for a non-French EU resident will rise from 19℅ to 34.5℅ and for a non-EU resident, from 33.33℅ to 48.83℅. This tax will not apply to a company subject to corporation tax.
The measure will apply to capital gains realized from 17th August 2012 and to the rents received from 1st January 2012.
It means that for a non-French resident, tax on rental income will rise from a lower rate of 20℅ to 35.5℅. The capital gains tax on property sales for a non-French EU resident will rise from 19℅ to 34.5℅ and for a non-EU resident, from 33.33℅ to 48.83℅. This tax will not apply to a company subject to corporation tax.
The measure will apply to capital gains realized from 17th August 2012 and to the rents received from 1st January 2012.
Stronger CFC rules for French CompaniesFrench companies will now have to provide more evidence to demonstrate to IR in order to avoid the application of CFC rules for their subsidiaries located in non-EU countries; even if it is a tax treaty protected country.
A New Deadline to Declare a Trust in France
Under the recent disclosure obligation rules created last year for trusts which have a link with France (article 1649 of the French tax code), a new administrative instruction requires that the annual return must be filed no later than 15th September 2012. When due, the special tax should be paid by this date too. As a consequence, the deadline for payment is extended from 15th June to 15th September 2012.
Under the recent disclosure obligation rules created last year for trusts which have a link with France (article 1649 of the French tax code), a new administrative instruction requires that the annual return must be filed no later than 15th September 2012. When due, the special tax should be paid by this date too. As a consequence, the deadline for payment is extended from 15th June to 15th September 2012.
MONACO TAX AND LEGAL UPDATE
The Propriété-Sûreté Convention
The National Council of Monaco proposed in November 2010 a Law establishing Fiducie in Monegasque law.
This Law has not been adopted; the Monegasque Government is not in favour of introducing a system similar to a Trust in the principality at this moment.
However, the Government has proposed the introduction of a measure, applicable to financial institutions, to strengthen legal certainty in terms of credit. A Bill has been prepared to establish the Propriété-Sûreté agreement. The agreement is based on the principle of the transfer by a debtor of financial assets within an ‘autonomous patrimony’. The credit institution would become the holder with responsibility of ensuring the conservation, management and the use, as a guarantee of the debts or liabilities of the debtor.
"Offshore" Companies Holding Property
As mentioned in earlier Updates, Law 1381 substantially reduced the tax payable by individuals purchasing a property in their own name or through a Monaco SCI, while slightly increasing the tax on a purchase through an "offshore" entity.
Under this law, for a period of one year after the passing of the Law (1st July 2011), real estate that was transferred out of an offshore entity to the requisite Monaco entity, such as an SCI, or to an individual, could be subject to a reduced registration tax of 1% of the value of the property.
By a decision of 4th July 2012, the Supreme Court of Monaco held that the one year period mentioned above was too short and contrary to Article 24 of the Constitution.
A Bill extending from one to three years the period to transfer a Monaco property out of an offshore company has been issued. We will keep you informed of whether this bill is adopted in an upcoming update.
EU APPROVAL OF THE UNIFIED RULES ON SUCCESSION LAW
Simplification of the Settlement of International Successions
On 7th June 2012 the European Commission's proposal to simplify the settlement of international successions received the final backing of the EU Council of Justice Ministers. The European Commission proposals were conceived in order to ease the legal burden when a family member with property in another EU country passes away.
Adoption of Regulation N 650/2012 of the European Parliament and the Council of 4th July 2012 has led to a substantial simplification of the settlement of international successions. It provides a single criterion for determining both the jurisdiction and the law applicable to a cross-border succession: the deceased's habitual place of residence. Upon election, a citizen may still choose his national law. A citizen can now plan their succession in advance with full legal certainty. Since entering into force on 17th August 2012, Member States have 3 years to align their national laws before the new EU rules on succession become effective. The UK, Ireland and Denmark will not be concerned by this regulation.
On 7th June 2012 the European Commission's proposal to simplify the settlement of international successions received the final backing of the EU Council of Justice Ministers. The European Commission proposals were conceived in order to ease the legal burden when a family member with property in another EU country passes away.
Adoption of Regulation N 650/2012 of the European Parliament and the Council of 4th July 2012 has led to a substantial simplification of the settlement of international successions. It provides a single criterion for determining both the jurisdiction and the law applicable to a cross-border succession: the deceased's habitual place of residence. Upon election, a citizen may still choose his national law. A citizen can now plan their succession in advance with full legal certainty. Since entering into force on 17th August 2012, Member States have 3 years to align their national laws before the new EU rules on succession become effective. The UK, Ireland and Denmark will not be concerned by this regulation.
In summary, the adopted rules will ensure that:
• A succession is treated coherently, under a single law and by one single authority;
• Citizens are able to choose whether the law applicable to their succession should be that of their habitual residence or that of their nationality;
• Parallel proceedings and conflicting judicial decisions are avoided in the EU;
• Mutual recognition of decisions relating to succession in the EU is ensured.
• A succession is treated coherently, under a single law and by one single authority;
• Citizens are able to choose whether the law applicable to their succession should be that of their habitual residence or that of their nationality;
• Parallel proceedings and conflicting judicial decisions are avoided in the EU;
• Mutual recognition of decisions relating to succession in the EU is ensured.
European Certificate of Succession
The creation of the European Certificate of Succession will enable an individual to prove their status and rights as heir or their powers as administrator of the estate or executor of the will, without further formalities throughout the EU.
This represents a considerable improvement on the present situation where individuals can have great difficulty exercising their rights. The result will be a faster and cheaper procedure.
The creation of the European Certificate of Succession will enable an individual to prove their status and rights as heir or their powers as administrator of the estate or executor of the will, without further formalities throughout the EU.
This represents a considerable improvement on the present situation where individuals can have great difficulty exercising their rights. The result will be a faster and cheaper procedure.
THE NEW FRENCH-SWISS TAX TREATYOn 28th August, the Economy Commission of the Swiss National Council rejected the new draft tax treaty between France and Switzerland. The draft, which amended the existing convention, was criticized as being advantageous only to France, with no corresponding advantage to Switzerland.
In the existing convention, French real estate owned directly by a Swiss resident is subject to French inheritance tax, but if the property is held by a real estate company (SCI), the shares are considered to be movable and are taxable only in Switzerland. However, the revision is aiming to raise an inheritance tax charge in France either in the case of direct ownership or indirect ownership via a company.
In addition, it was proposed that France would have jurisdiction to tax the worldwide assets of a Swiss resident, provided that a beneficiary is resident in France and had been French resident for at least six years of the last ten years.
In the existing convention, French real estate owned directly by a Swiss resident is subject to French inheritance tax, but if the property is held by a real estate company (SCI), the shares are considered to be movable and are taxable only in Switzerland. However, the revision is aiming to raise an inheritance tax charge in France either in the case of direct ownership or indirect ownership via a company.
In addition, it was proposed that France would have jurisdiction to tax the worldwide assets of a Swiss resident, provided that a beneficiary is resident in France and had been French resident for at least six years of the last ten years.
As the draft has been rejected by Switzerland, a new round of negotiations will start and we will provide an update in due course.
UK CASE ON “SUBJECT TO TAX” IN DTTSIn recent case law (Paul Weiser v HMRC [2012]) a tribunal considered that a UK pension received by an Israeli resident, being exempt from income tax for the first ten years in Israel, should not be considered as being “subject to tax” and, therefore, should not benefit from the exemption from UK tax as provided by the treaty. The court did not accept the tax payer’s argument distinguishing between “subject to tax” and ‘liable to tax”.
UK CASE ON “SUBJECT TO TAX” IN DTTSIn recent case law (Paul Weiser v HMRC [2012]) a tribunal considered that a UK pension received by an Israeli resident, being exempt from income tax for the first ten years in Israel, should not be considered as being “subject to tax” and, therefore, should not benefit from the exemption from UK tax as provided by the treaty. The court did not accept the tax payer’s argument distinguishing between “subject to tax” and ‘liable to tax”.
