Evokes for the first time in 1998 by the government of Michel Rocard, the term tax shield appears for the first time in the Finance Act 2006, section 74. This article states that these taxes should not exceed 60% of the income of each taxpayer. This rate is reduced to 50% by the TEPA Act of August 21, 2007.

In version 2006, payroll taxes are not included in the calculation of taxes covered by the tax shield. These samples are the contributions to repay the social debt (CRDS) and the general social contribution (CSG). What is that, ultimately, the rate of tax shield exceeds 70%, and significant changes are made by the TEPA law. In addition to the rate that is reduced to 50%, social security contributions are now part of the list of relevant taxes and levies. Which is certainly much better for taxpayers.

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The mechanisms of the tax shield

Taxes, fees and services affected by the tax shield is the solidarity tax on wealth (ISF), the capital gain tax, the income tax, social security contributions (CSG and CRDS) and the different taxes inherent to the primary residence. The principle of the tax shield is pretty simple: If the taxes paid by a taxpayer exceed 50% of its revenues, it can reclaim the difference from the tax authorities.

To find out if it is affected by the tax shield, simply divide the total of taxes, different taxes and social charges involved in the total revenue. If the result exceeds 0.5, you can apply for reimbursement of the overpayment. For 2009, applications must include the taxes paid in 2008 on 2007 income. To do this, complete Form 2041 and send it to DRIDI tax center to which the taxpayer is affiliated with a RIB.

The main beneficiaries of the tax shield are very wealthy individuals but have little income and low-income households but own them. There are also the retirees in the latter category. Foreigners living in France for over three years and not having the status of non-residents may also benefit from the tax shield. This measure is primarily intended for wealthy foreigners.

For or against the tax shield

Opponents of the tax shield the view that the tax cap measure benefits only the richest classes. They also discuss the possibility of tax audits of taxpayers feared, in case of claim. Finally, as the provisions on the tax shield are not in the Constitution of the Republic, it may be deleted at any time.

Defenders of the tax shield find this highly appropriate to limit the tax exile, that is to say the departure abroad of taxpayers. Some French celebrities based abroad have announced their intention to return following the introduction of the tax shield. These advocates also believe that the tax shield is a way that increases tax revenues of the state, which is the case in the United States. Finally, they find that it is a device that benefits low-income taxpayers who, in well-defined cases, pay taxes exceed their income.