Must do before Dec 31st

[Clair]

If you have certain types of savings, you have to choose before Dec 31st 2006 how you'll be paying for your 2007 tax in the interest.

Making the right choice is important because new tax ceilings are being

introduced in 2007 and they will probably affect how much tax you'll

have to pay on the interest earned.

New 2007 tax ceilings for 1 part:

• up to €5614 - 0%
• €5615 to €11198 - 5.5%
• €11199 to €24872 - 14%
• €24873 to €66679 - 30%
• above 66679 - 40%

The choice must be made according to your 2006 total income. You can either

• select the automatic deduction called Prélèvement Libératoire Forfaitaire (PLF) and done by the financial institution (at a % rate which rate of which varies according to your type of savings)

or

• choose to declare the interest earned during 2006 on your 2007 return as part of your income (IRPP)

For instance, if you have a bank savings account, the bank would automatically deduct 16% of the interest as tax under PLF.

If you income is within the 5.5% rate, you've paid more than you should and it's your loss!

But if your income is within the 30% rate, you win!

By declaring yourself, you are able to reclaim a small part of the Contributions Sociales (currently 11%  made of 8.2% CSG + 0.5% CRDS + 2.3% PS) which you also have to pay on the same interest, as expenses in 2008. (you'll be able to claim 5.8% of the 8.2% paid in CSG)

I know it sounds complicated, but look into it before Dec 31st

PS: this is not meant to be financial advice, just a reminder...!

[Bastet]

This is probably me being dumb, but how does one make this choice?   I don't recall that we've ever received anything before from our bank that looks relevant to this.   In our case, it would definitely be beneficial to declare it ourselves.

Also, do you know why the banks deduct 16%?   We were told by our bank that they deduct 11% for the ubiquitous social contributions - have they misled us ?  What is the other 5% ?    Again, apologies if these seem stupid questions.

 

[Clair]

Your financial institution is the place to go to make the selection.

The 16% is the income tax on the interest earned.

The 11% is the Contributions Sociales (another tax) on the interest which goes towards plugging the social security fund (amongst other things). It's the price you have to pay if you have enough money to have savings in the first instance! [:P]

Some savings schemes do not attract any tax at all, but pay very little interest and have limited ceilings and other restrictions (Livret A at 2.75%, LEP at 3.75%, Codevi at 2.75%), some attract CS tax only and most attract both CS and income tax.

The interest on basic bank savings is taxed at 16%, some other schemes (life insurance contracts for instance) attract tax at 35%, all of which attract CS tax at 11%... and within these, the rate of tax also varies according to when the scheme was contracted...!

Are you asleep yet?[8-)]

PS: no you're not being dumb, it is that complicated!

PPS: I am NOT a financial whizz kid, adviser, specialist... I just want to pay as little as I can get away with... If anyone knows this to be incorrect, please speak up

[Catalpa]

I did know this was happening but had parked the thought far far away at the back of my mind. Thanks Clair.

[Bastet]

[quote user="Clair"].

The 16% is the income tax on the interest earned.
The 11% is the Contributions Sociales (another tax) on the interest which goes towards plugging the social security fund (amongst other things). It's the price you have to pay if you have enough money to have savings in the first instance! [:P]

Some savings schemes do not attract any tax at all, but pay very little interest and have limited ceilings and other restrictions (Livret A at 2.75%, LEP at 3.75%, Codevi at 2.75%), some attract CS tax only and most attract both CS and income tax.

The interest on basic bank savings is taxed at 16%, some other schemes (life insurance contracts for instance) attract tax at 35%, all of which attract CS tax at 11%... and within these, the rate of tax also varies according to when the scheme was contracted...!

[/quote]

Thanks Clair;  most of our savings are in the category of low interest and no tax or only CS taxable so I think this choice will not after all apply to us.  I have however, discovered that these are still declarable to CPAM for them to impose their 8% cut.  It seems there is no such thing in France as 100% tax free savings.

[Crevette]

I think I may well  be heading to a situation where I will have to pay "a bit of both?" (if this is possible!!!)

I have a savings account (ING Direct - presumably taxed as "Prélèvement Libératoire Forfaitaire") in France and a saving account (HSBC Online Saver - registered as "No Tax taken") in the UK.

As the UK accounts is registered as "no tax" as I beleive I need to work out the interest I gain and declare this in the tax return as additional income (which will be taxed at the 30% rate for me).

Anyone in a similar situation? Can the UK income be taxed at the "ibératoire Forfaitaire" rate?

Regards,

-Rob-

 

[Cassis]

[quote user="Crevette"]

I have a savings account (ING Direct - presumably taxed as "Prélèvement Libératoire Forfaitaire") in France and a saving account (HSBC Online Saver - registered as "No Tax taken") in the UK.

[/quote]

You can check which system of taxation you have opted for online at the ING website - the PLF IS the default option unless you checked another box when you opened the account, or afterwards.