The Flat Tax in France Set to Increase to 33% in 2025
A new amendment proposes to raise the Flat Tax from 30% to 33% starting in 2025, with retroactive effect on 2024. This increase will impact income from financial investments, including cryptocurrencies like Bitcoin.
French savers who hold crypto, life insurance, PEA, PER, and other investments will see their gains subject to higher taxes if the measure is approved.
The government aims to reduce the public deficit by generating an additional 800 million euros per year. However, the measure still needs to be approved by the National Assembly and the Senate to take effect.
An Increase in Tax on Savings Income
The amendment was adopted by the finance commission of the National Assembly as part of the examination of the 2025 Finance Bill. If confirmed in the upcoming legislative steps, the Flat Tax will rise by three points, bringing the total rate to 33%. This increase will apply retroactively from the 2024 tax year, meaning that income earned this year will be affected.
The current flat-rate withholding tax is divided into two parts: 17.2% for social charges and 12.8% for income tax, totaling 30%. With this new provision, only the income tax portion would be changed, reduced to 15.8%, while social charges would remain unchanged.
Why Increase the Flat Tax?
The government justifies this measure by the need to reduce the public deficit and increase tax revenue. The objective is to generate approximately 800 million euros in additional revenue each year. This increase comes at a time when France faces significant public spending and seeks to balance its budget. Savings, highly encouraged in France with some of the highest rates in the eurozone, are thus being tapped into.
This decision is seen as a blow to savers, whether they have invested in Bitcoin, cryptocurrencies, life insurance, PEA, or PER. All these products are subject to the Flat Tax, and their holders will see their gains subject to higher taxes if the measure is definitively adopted.
The Impacts on Investments and Capital Gains
With this increase in the Flat Tax, dividends, interest, and capital gains generated from financial investments such as Bitcoin or other cryptocurrencies will be subject to higher withholding tax. For many savers, this three-point increase could influence their investment decisions, especially for those who currently benefit from a favorable tax regime. Some investors may be tempted to revert to the previous tax regime, which involves integrating these income into the progressive income tax scale, although this option is not always advantageous.
One of the challenges for taxpayers will be to determine the best tax option based on their personal situation. Consulting a tax advisor could be a wise step to maximize returns despite this change in legislation.
A Legislative Journey Still Underway to Increase the Flat Tax
Although the amendment was voted on in the finance commission, there are still several steps before it takes effect. The text still needs to be discussed and approved in a plenary session of the National Assembly, and then in the Senate. The end of the year will be crucial to know the final fate of this measure, which could reshape the approach of many savers towards their financial investments.
This increase in the Flat Tax is part of a set of tax measures planned for 2025, alongside initiatives such as the increase in social benefits or the expansion of interest-free loans (PTZ) to the entire territory.
