The end of 2018 was marked by the demands of the yellow vests relating in particular to the restoration of the ISF in its historical form.

As a reminder, the ISF has been abandoned - as of January1, 2018 - in favor of the Impôt sur la Fortune Immobilière (IFI) which is refocused on real estate assets.

These impressive claims have marked the last 15 weeks but have - for all that - convinced neither the government nor the French deputies who remain inflexible.

The return of the tax revenues linked to the reinstatement of the Wealth Tax is not decided.

However, the year 2019 is marked by a small upheaval in the collection of public money - from individuals - by the implementation of the levy at source (PAS).

This structural reform requires practical adjustments in order to avoid that its realization constrains too heavily the French households.

One of the parameters is the link between the PAS and the actions that give right to tax reductions or credits.

The difficulty lies in the fact that the rate applied for the 2019 PAS is calculated from n-2 income - but without taking into account tax reductions or credits.

To avoid fracturing the purchasing power of French taxpayers, they will benefit from an advance payment of 60% of certain tax reductions and credits relating to expenses incurred in 2017.

Among these expenses, it is advisable to retain those related to the employment of an employee at home, to the family (childcare for children under 6 years old), to dependence (EHPAD) or to rental investment (Pinel, Duflot...).

In addition to this change in the Treasury's agenda, the end of the year was also an opportunity to vote on the finance law for the coming year and to define the state budget.

The 2019 Budget Law was validated by the Constitutional Council on December 28, 2018 and went into effect on December 31, 2018.

Among the new features that concern individuals, the following are worth mentioning

The Dutreil-transmission system has been made more flexible and simplified

  • The thresholds for holding financial rights have been lowered to 10% of financial rights and 20% of voting rights for listed companies and to 17% of financial rights and 34% of voting rights for unlisted companies.
  • The exemption has been maintained in case of transfer or donation of securities between the signatories of the agreement.
  • The obligation to provide an annual certificate has been replaced by an obligation to reply to the tax authorities

The Exit Tax system has been adjusted

  • The period of relief is reduced to 2 years for taxpayers whose securities have a value of less than €2.5 million and to 5 years beyond that.
  • From now on, the deferment of payment will be applicable, without the provision of guarantees, to all cases of transfer of the tax residence to a State or territory that has concluded with France an administrative assistance agreement to combat tax evasion and avoidance as well as an administrative assistance agreement.

The contribution-assignment mechanism has been modified

  • The reinvestment threshold has been raised to 60% of the proceeds of the sale, compared to 50% previously.
  • The scope of reinvestment is extended to venture capital funds under certain conditions.

The scope of application of the single flat-rate tax (PFU ) has been extended, on the one hand, to gains materialized during withdrawals from PEAs of less than 5 years and, on the other hand, to gains from occasional sales of bitcoins and other digital assets, without any possible option for income tax.


The administration also seems to have obtained the availability of a tool that it has been asking for for many years.

The 2019 Finance Act introduces a new article L64 A of the LPF which has modified the procedure for abuse of tax law.

This amendment will be applicable to corrections notified as of January1, 2021 relating to acts performed or issued as of January1, 2020.

This section replaces the "exclusively tax" purpose with the "primarily tax" purpose.

Thus, the abuse of law "fictitious act" is replaced by the simple "tax consideration".

This reform is a cause for concern for the professionals in the field, as the administration has been involved for years in a frantic fight against the implementation of favorable tax schemes that it does not hesitate to stigmatize.

The mistrust of the administration, for whom any tax optimization is necessarily abusive, could result in the questioning of mechanisms whose very nature is the control of taxation.

Professionals are worried about the way the administration will soon look at property stripping, the PEA, life insurance, the Pacte Dutreil or even the contribution-cession.

A questioning of these mechanisms could - paradoxically - result in an abusive use of the abuse of rights procedure...

Only the controls that will begin on January1, 2021 will provide the answers as to how the administration will use its new toy.

While waiting for these controls, it is to be hoped that this new article will not be the source of a legal insecurity which only the administration could have the control...

Hugo Rocard

Lawyer at the Paris Bar


To contact Achille Avocats


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