France to cut back on capital gains tax

Although theoretically still taxed at the same level as income, capital gains will benefit from substantial rebates depending on the nature of the shareholder and the length of the holding period.

According to local reports, Hollande is due to announce that capital gains tax could be cut down by as much as 65% in the case of long holding periods, resulting in an effective tax rate of 32.75%.

In addition, investors in SMEs and owners going into retirement will benefit from even more favourable rebates, again based on the duration of the holding period. In that case, the capital gains tax rate could be cut down by as much as 85%, resulting in an effective tax rate of 23.75%.

While the exact pace of the rebates is not yet known, French daily Les Echos reported that investors could see the rate fall by as much as 50% in the space of two years.

The tax reform was an integral part of Hollande's election platform but sparked controversy in business circles when it emerged that proceeds from the sale of a business could be taxed by as much as 65%. Although the private equity industry was particularly vocal about the negative impact of higher capital gains tax rates on investors and business owners alike, a small group of entrepreneurs – self-dubbed "Les Pigeons" – managed to gain greater exposure and force a rethink of government policy in the autumn.

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