2025 Budget
2025 Budget
Below are the main changes proposed in the draft 2025 French tax budget. As usual, the budget includes the annual updates to the tax scale bands, tax ceilings and limits to follow inflation, at a proposed rate of 2%. What follows is subject to any changes which may be introduced between now and the final acceptance vote.
The barème and set allowance limits applicable to 2024 income are expected to be as follows:
The barème and set allowance limits applicable to 2024 income are expected to be as follows:
• Barème :
Annual allowance for housing a person aged over 75: €4,047.
Further changes to Furnished Lettings
The conditions for eligibility to the Micro BIC regime applicable to furnished lettings have been further amended. This comes at the back of the fiasco from the 2024 Finance Law and further complicates considerations for many landlords trying to understand the effect of current plans on their situation. We can only hope that there will be no more “back to the drawing board” moments. The current state of play can be summarised as follows:
We have outlined the different layers of legislation and proposals in a separate bulletin available on our webiste in an effort to assist those concerned but noting, of course, that some measures are at a draft stage, so we expect changes between now and the end of the year.
Capital Gains Tax on Disposals of Properties Rented Furnished
Article 24 of the Budget proposes to align the capital gains tax treatment for professional and non-professional landlords. Currently professional landlords must reintegrate the property depreciation they have claimed against their rentals, when computing their property taxable gain, but this is not the case for non-professional landlords. If this measure is accepted non-professional landlords will be subject to the same rule.
Temporary Extra Tax on High Income
This extra income tax charge labelled as “Contribution Différentielle sur les Hauts Revenus” would apply to 2024, 2025 and 2026 income, in addition to the existing Contribution Exceptionnelle Sur les Hauts Revenus. Both extra charges affecting higher earners are defined as:
ii) For single taxpayers those with a taxable income above €250,000.
The extra charge would be determined as the difference between a theoretical and reconstituted tax charge calculated on a taxable base which is yet to be defined, and 20% of the total taxable worldwide income known as Revenu Fiscal de Référence. The theoretical tax charge is likely to be substantially different to the effective liability.
In essence the extra charge will result in a reduction of certain tax credits, including any international treaty credits and an increase by reference to the 12.8% flat income tax rate applicable to investment income and gains.
We expect further clarification on the exact computational rules to determine the quantum of the Contribution Différentielle sur les Hauts Revenus”.
Tax residence
Under Article 4 B of the French tax code, individuals who fulfil at least one of the following criteria are treated as having a French tax “domicile” (see below) for French tax purposes:
Note that the term “domicile” is a “faux ami”. It does not legally mean the same as “domicile” in the English sense and should thus be treated as akin to tax residence.
Article 23 of the 2025 Budget proposes to codify within FTC Article 4B, the existing doctrine notion that tax residence determined under a relevant Double Tax Treaty (“DTT”) takes precedent over domestic rules. This could, for instance, lead to situations where individuals who fulfil one of the above domestic French law tax residence criteria but may nonetheless be treated as non-residents of France if they can demonstrate a tax residence in a treaty partner country under the terms of the relevant DTT signed with France.
Should you have any queries in relation to your French tax affairs please email French.tax@bdo.gg
| Income Bands (€) | % |
| Up to 11,520 | 0 |
| Between 11,520 and 29,373 | 11 |
| Between 29,373 and 83,988 | 30 |
| Between 83,988 and 180,648 | 41 |
| In excess of 180,648 | 45 |
- The tax benefit for each extra half family share is capped at €1,794 (“plafonnement”), with specific rules in respect
- of disabled dependants, parents who have brought up children on their own, war widows, and army veterans.
- Households which include married or civil partnership children or children with dependants, may benefit from an annual tax-free allowance of €6,807. The same amount is awarded as a tax deduction when providing ongoing financial support (food allowance) to a child over 18.
- Capping of the 10% annual pension allowance: €4,407 per household, with a minimum deduction of €451.
- Capping of the 10% allowance on salaries: €14,455 per person, with a minimum of €505.
Annual allowance for housing a person aged over 75: €4,047.
- The deemed total annual income which can trigger a mandatory taxation based on “unexplained” external signs of wealth is updated to €53,925. This is calculated through a notional means-test using deemed income streams and levels for each “sign of wealth”.
- The means-tested tax allowance for the over-65s or the disabled will increase to €2,801, where the taxable income falls below €17,550 and to €1,401, between €17,550 and €28,230 of taxable income.
- The maximum annual charitable donation eligible for a tax credit in respect of all donations made in 2024 to “organisations assisting people in difficulty” will remain at €1,000.
- The taxable income below which a taxpayer may benefit from a nil rate under the “Pay-As-You-Go” system between 1 January 2025 and 31 August 2025 would be €28,792 and €29,368 from 1 September 2025 to 31 December 2025.
- The minimum income tax rate applicable to French source income received by non-residents of France is set at 20% up to €29,373 and 30% thereafter.
- The withholding tax scale on 2024 French source salaries and pensions paid to non-French residents is updated as follows:
| Income Bands (€) | % |
| Up to 17,157 | 0 |
| Between 17,157 and 49,766 | 12 |
| In excess of 49,766 | 20 |
Further changes to Furnished Lettings
The conditions for eligibility to the Micro BIC regime applicable to furnished lettings have been further amended. This comes at the back of the fiasco from the 2024 Finance Law and further complicates considerations for many landlords trying to understand the effect of current plans on their situation. We can only hope that there will be no more “back to the drawing board” moments. The current state of play can be summarised as follows:
i)A law “Loi Le Meur” voted on 7 November and applicable to 2025 income aligns the Micro BIC conditions for all “tourism rentals” including Chambres d’Hôtes, regardless whether the property is registered as a Meublé de Tourisme Classé or not.
ii)The 2025 Budget contains an amendment proposal to further alter the Micro BIC regime for properties registered as Meublés de Toursime Classés.
iii)The measures introduced through the 2024 Finance Law were suspended through a tolerance which is extended in respect of 2024 income.
We have outlined the different layers of legislation and proposals in a separate bulletin available on our webiste in an effort to assist those concerned but noting, of course, that some measures are at a draft stage, so we expect changes between now and the end of the year.
Capital Gains Tax on Disposals of Properties Rented Furnished
Article 24 of the Budget proposes to align the capital gains tax treatment for professional and non-professional landlords. Currently professional landlords must reintegrate the property depreciation they have claimed against their rentals, when computing their property taxable gain, but this is not the case for non-professional landlords. If this measure is accepted non-professional landlords will be subject to the same rule.
Temporary Extra Tax on High Income
This extra income tax charge labelled as “Contribution Différentielle sur les Hauts Revenus” would apply to 2024, 2025 and 2026 income, in addition to the existing Contribution Exceptionnelle Sur les Hauts Revenus. Both extra charges affecting higher earners are defined as:
i)For married or Pacsed couples, those with a total worldwide taxable income exceeding €500,000; and
ii) For single taxpayers those with a taxable income above €250,000.
The extra charge would be determined as the difference between a theoretical and reconstituted tax charge calculated on a taxable base which is yet to be defined, and 20% of the total taxable worldwide income known as Revenu Fiscal de Référence. The theoretical tax charge is likely to be substantially different to the effective liability.
In essence the extra charge will result in a reduction of certain tax credits, including any international treaty credits and an increase by reference to the 12.8% flat income tax rate applicable to investment income and gains.
We expect further clarification on the exact computational rules to determine the quantum of the Contribution Différentielle sur les Hauts Revenus”.
Tax residence
Under Article 4 B of the French tax code, individuals who fulfil at least one of the following criteria are treated as having a French tax “domicile” (see below) for French tax purposes:
•They have a home “foyer fiscal” or, if this is not conclusive, France is where they spend most of their time; or
•They perform employment or independent services in France (unless such activity is only ancillary); or
•They have the centre of their economic interests in France.
Note that the term “domicile” is a “faux ami”. It does not legally mean the same as “domicile” in the English sense and should thus be treated as akin to tax residence.
Article 23 of the 2025 Budget proposes to codify within FTC Article 4B, the existing doctrine notion that tax residence determined under a relevant Double Tax Treaty (“DTT”) takes precedent over domestic rules. This could, for instance, lead to situations where individuals who fulfil one of the above domestic French law tax residence criteria but may nonetheless be treated as non-residents of France if they can demonstrate a tax residence in a treaty partner country under the terms of the relevant DTT signed with France.
Should you have any queries in relation to your French tax affairs please email French.tax@bdo.gg