Presentation: From the solidarity tax on wealth paid under 2012, claims held by non-residents in predominantly real estate companies are no longer taken into account in assessing the shares of these companies (Explanatory memorandum, excerpts from the report AN No. 3503).
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Supplementary budget for 2011.
Article 40
I. - Section 5 of Chapter I of Title IV bis of the first part of Book I of the Code is supplemented by Article 885 ter T as follows:
"Art. 885 T ter. - Claims against, directly or through one or more companies interposed by persons not having their tax domicile in France, a company in a property referred to in 2 ° of I of Article 726, are not deducted in determining the value of the shares that they hold in society. "
II. - The I apply to the solidarity tax on wealth due since 2012.
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The non-resident individuals are taxed at the solidarity tax on wealth (ISF) on the shares they hold in companies in a property such as real estate companies (SCI), in proportion to the ratio of value of property held in France by the company and total assets of the company, but not on their investments.
As a result, funding a company in a property which they hold part through contributions in the current account, the associated non-residents can reduce the value of their shares in the company, which are liable to wealth tax, as that such contributions are liabilities, not so held that the claims are included in their taxable wealth, because they are investments.
To put an end to such optimization schemes, it is proposed to exclude debts incurred in respect of non-resident partners for the valuation of shares they hold in a society in a property.
This article tends to limit the possibilities of optimizing the amount of the solidarity tax on wealth that taxpayers owe non-residents, excluding debt they hold in companies with real estate link preponderance of the value of their shares in these societies.
This modification of existing law should impose taxpayers who benefited to the tune of 20 million Euros per year.
I-TAX NON-RESIDENT TAXPAYERS TO SOLIDARITY TAX ON CAPITAL
The quality of non-resident taxpayer is assessed against the provisions set out in Section 4 B of the General Tax Code relating to income tax. These provisions are in fact regarded as tax resident in France people:
- That in France their home or their place of principal residence;
- Exercising a professional activity in France, employed or not, unless they can show that the activity is conducted on an accessory;
- That in France the center of their economic interests.
In addition, residents are also considered the state officials who serve or are responsible for mission in a foreign country and which are not subject to that country to a personal tax on all their income.
The non-resident taxpayers are therefore all tax households that do not meet any of these criteria. This quality is attached to it under all the taxes they owe to France.
1 - The subjugation of non-residents to the solidarity tax on wealth
Article 885 A of the CGI states that "are subject to annual solidarity tax on wealth, where the value of their property is greater than the limit of the first tranche of tariff set out in Article 885 U [...] , individuals do not have their fiscal domicile in France, because of their property in France. "
In 2010, 8,044 non-resident taxpayers and have paid 65 million euros for the ISF.
Contrary to taxpayers resident in France, subject to unlimited tax liability on any property they have they are located on national territory or abroad (1), the non-resident taxpayers are taxed that for goods they hold in France.
However, the principle of taxation is moderate, Article L 885 of the CGI, for a general exemption of financial investments made by non-residents.
This provision tends to encourage them to maintain or increase their investments in the territory.
(1) Except as otherwise provided by international conventions.
Financial investments are all investments are made or whose income fall within the category of income from capital. In practice, this demand deposits or term in euros or currency, current accounts held in a company or corporation that is headquartered in France, bonds, debentures, shares or rights social and life insurance contracts or funding underwritten by insurance companies established in France.
2 - The special rules on financial investments made in companies in a property
According to Article 885 L above, some titles have not, however, the character of financial investments, like shares or shares held by non-residents in a company or a French or foreign legal entity with assets French social consists mainly of real property or interests in land situated on French territory. This is to prevent the formation of a company in a property by non-resident taxpayer may impede the perception of the ISF under the property held.
Three conditions must be met for these securities are not considered as financial investments:
● The assets of the company that issued the securities to be mainly real estate. The three categories of goods may be taken into account in determining the composition of that heritage buildings are built or not built, the real rights on such property (usufruct, leasehold ...) or the securities of companies themselves predominantly real estate. The dominance property is subsequently recognized if the value of property in France (1) represents over 50% of the value of corporate assets located in France.
● The title should not be admitted to trading on a regulated French or foreign. However, an exception applies to securities that are considered SICOMI financial investments, the company is listed or not, so as not to introduce distortion of competition within that category.
● Stocks and shares are held accountable by the ISF that have no tax domicile in France.
(1) Other than buildings used by the company to its own industrial, commercial, industrial, commercial, agricultural or non-commercial.
The shares and units that meet these three conditions are then imposed in proportion to the value of real estate located in France compared to the total assets of the company in France and abroad.
For example, one company has a corporate assets worth a total of 100 distributed as follows:
_____________Actifs Français_______Actifs étrangers___________Total
Real Estate 30 October 40
Furniture 10 50 60
Total 40 60 100
This company will be treated as a partnership in a property as its real estate assets located in France represents 75% of its corporate assets located in France and that, even though his total wealth is not primarily composed of real estate.
If the value of a share of this company is 10, only a value of 3 will be taxed under the wealth tax as real estate assets located in France is only 30% of the total assets of the company.
3 - Practical Optimization
The shares of companies in a property so defined are subject to the ISF for their market value which is obtained by dividing the net assets by the number of shares.
The net assets of a company is the value of real estate owned, bank increased funds available to it and minus all debt included in liabilities, like the current account contributions by the partners. These accounts trace the amount of money lent temporarily to the company by the taxpayer. In theory, this option allows the company to benefit, if necessary, a source of internal financing and less expensive than other forms of financing. These accounts are an important element of flexibility for companies and the acceptance of a risk to the partners who own the debt.
Contributions in the current account are treated as financial investments and are therefore exempt from wealth tax if the taxpayer is non-resident. This exemption aims to enhance the attractiveness of companies located in France, who could benefit from foreign investments and protect some of those involved are non-residents. However, it also mounts to optimize the tax due for the ISF that this article seeks to frame.
Indeed, contributions in the current account of a non-resident taxpayer accounts on the liabilities of the company reduced the amount of the net assets of that company and therefore the value of the share held by the same taxpayer. If the taxpayer was resident, the optimization scheme would not be possible since these financial investments have been imposed.
In the case of a corporation with assets of 20 and to which a resident partner and a non-resident partner have made 10 on each partners' current accounts, assets accrued net is zero and therefore the value of the shares also. None of the partners will therefore be subject to wealth tax in respect of such shares.
However, the resident taxpayer will be taxed at the ISF under its financial investment of 10, while the non-resident taxpayer is not taxable on the plate.
This shows that the non-resident taxpayer and may cancel the tax under the ISF, while reducing by half that of the resident taxpayer, indirect beneficiary of the exemption.
II-NEUTRALIZATION OF CLAIMS OF NON-RESIDENTS FOR VALUATION OF SHARES predominantly real estate companies
1 - The anti-abuse measure
This article introduces a new Article 885 bis ter in the CGI, which provides, that from the ISF acquitted in respect of 2012, claims held directly or indirectly by non-residents in companies with a preponderance real estate (1) are not taken into account in determining the value of the shares. These financial assets are not taxed at the ISF, but simply offset with respect to the determination of net asset value.
In the event of such a method of valuation of shares, a company with assets of 20 and to which a resident partner and a non-resident partner have made 10 on each partners' current accounts, with assets Accrued net since only 10 of the intake of a resident taxpayer's current account is carried as a liability. Initially, the value of shares held by the two partners is determined by reference to the asset accounts net of 10. They are all taxable as such to the ISF. In a second step, the resident taxpayer is taxed at the ISF under its financial investment of 10, while the non-resident taxpayer remains non-taxable on the plate.
Therefore, the resident taxpayer no longer benefits indirectly from the exemption, while the non-resident taxpayer can no longer cancel the tax to the ISF.
(1) These are now defined by reference to Article 726 of the CGI which takes the definition presented to the doctrinaire DB S 346 7.
2 - Performance measurement
Although it is very difficult to quantify this measure, its expected return is 20 million euros per year. No evidence has been presented on the number of taxpayers involved and the tax generated projection. This encryption is based on the reconstruction of a base housing that can enter into the composition of taxable assets to the ISF, is based on the assumption that non verifiable non-resident taxpayers have systematically optimized and that their imposition optimization has fully offset the tax due. Therefore, the additional tax resulting from the measure will likely be less than the amount reported.