The wealth tax reform introduced by the government at the beginning of 2018 allows for a reduction in taxation on income from movable assets, which are now taxed on the basis of a "flat tax" of 30% whereas the tax rate could previously be as high as 60.5%.

Here we explain the main principles of this new taxation method.

What's changing : since January^1, 2018, income from movable capital -

• dividends paid in connection with your equity investments; or
• bond coupons received in the context of real estate crowdfunding loans -

are now taxed at the single flat rate (PFU) of 30% or, on option, at the progressive income tax scale (applicable until December 31, 2017).

The 2 tax "moments" of your investment:

Flat Tax_Up to 30.5% less tax_Couzineau Avocats

1. Year of payment:

Income from assets is subject to a single flat-rate non-dischargeable deduction (PFUNL) of

• 12.8% (previously 24% for bond coupons and 21% for dividends);
• to which is added the social security deductions of 17.2% (previously 5% + 1.7% increase in the CSG),

for a total of 30%.

In practice, the debit is always made by the paying institution, in this case by the platform.

You were exempted from the flat-rate levy? It is still possible to ask to be exempted from the PFNL when the reference tax income does not exceed 25,000 € or 50,000 € for a couple, for bond coupons. For dividends, the thresholds have been raised to €50,000 and

75.000 € for a couple. The application must be made by November 30 at the latest.

 

2. The following year, the year in which the income is declared: the income is subject to income tax less the NFP deducted at source

In principle, the single flat rate tax (PFU) of 12.8% (30% with social security deductions of 17.2%) applies. The PFUNL deducted at source as an advance payment is deducted from the income tax.

In effect, because of the alignment of the UBIT rate with the UBIT rate, this is equivalent to paying tax at source.

 

If you are in the 14% tax bracket, opt for the progressive scale

The taxpayer has the possibility to opt for the progressive income tax scale according to the following modalities:

• The option is express and irrevocable;
• The option is global and concerns all income from movable assets, gains and profits falling within the scope of the PFU (including capital gains on the sale of securities);
• The option is exercised each year when the tax return is filed.

When the option is taken, the income is taxed as before at the marginal income tax rate, with a 40% deduction on dividends.

In order to calculate how much this new mechanism will increase your return on this type of investment, we advise you to contact Raizers investment consultants: [email protected].