According to press reports in France, the government is considering increasing the flat rate tax on savings and investment income to 36%, marking a significant increase from the current rate of 30%.
The flat tax, or single flat tax - Prélèvement Forfaitaire Unique - PFU, - currently applies at 30% on dividends, capital gains and interest, but an increase to 36% would aim to increase the contribution of the wealthiest savers and investors.
The tax comprises income tax at 12.8% and social charges at 17.2%. Many international owners, however, only pay a solidarity tax of 7.5%, instead of the social charges, giving a combined rate of 20.3%.
Most affected would be wealthier households, as for many households it is more beneficial to opt for such income to be taxed using the standard income tax bands. Thus, those whose marginal rate of income tax is 11% could opt to pay 11%+ 17.2% = 28.2%, rather than the 30% PFU total rate. Conversely, those whose marginal rate is 41% would be better off using the PFU.
In 2024, the French Senate approved an increase to 33%, but the government maintained the rate at 30% for 2025, pending a political consensus. However, budgetary pressures and debates on tax justice suggest an increase in the current budget, potentially larger than expected.
When asked by Le Parisien newspaper whether taxes should be increased globally, the French Prime Minister Sébastien Lecornu said “I will make a budget proposal in which some taxes will increase, but others will decrease.”
The tax that is it being mooted might be reduced is the CSG element of the social charges (prélèvements sociaux). The CSG applies at different rates for different types of income.
Nevertheless, those on a pension income hoping the charges will be reduced are likely to be disappointed as the press reports suggest that only the social charges on salaried income are likely to benefit.
The budget proposals will be announced later this month, following which they will be considered by the French Parliament.
Related Reading:
