- VAT rate changes / reminder - Capital gains on holiday homes - Tax credit for competitiveness and employment (CICE) - Employment law changes - Part time workers / minimum number of hours - Single euro payments area (SEPA)

1. VAT RATE CHANGES -
REMINDER
VAT rate changes are scheduled to
take place from 1 January 2014 in
accordance with the 2013 Finance
Act, although some late modifica-
tions to specific sectors have been
made. Highlights are:
(1) Goods and services currently
taxed at 7% will in future be
taxed at 10% subject to some
exceptions:
 Cinema tickets
 Environmentally friendly, energy
saving improvements carried out
in residential properties where
construction was completed at
least two years previously
 Renovation or improvements
carried out in respect of state
financed housing and low in-
come households
 Imported works of art or an-
tiques due to increase from 7%
to 10% in January 2014 will now
be subject to VAT at 5.5%
 Fertilizers and related products
will now be taxed at the standard
rate (20%)
(2) Goods and services currently
taxed at 5.5% will continue to
be taxed at this rate instead of
being reduced to 5% as origi-
nally proposed.
(3) Minimum rate remains un-
changed. This rate mainly re-
lates to certain medical prod-
ucts and also printed newspa-
pers, however digital press at-
tracts the standard rate from 1
January 2014.
CAPITAL GAINS ON HOLIDAY
HOMES
Non-resident French property own-
ers have been hit by a number of
tax changes over recent years.
Non-resident owners of property in
France must now pay social contri-
butions on disposals leading to a
total charge of 34.5% or 48.83% as
per the following table:
There is also an added surtax vary-
ing from 2% to 6% on high value
transactions.
The French government has how-
ever recently introduced some tem-
porary measures aimed at kick-
starting the property sector. With
effect from February 2013, property
sales by individuals became ex-
empt from capital gains only after a
holding period of 30 years. This
holding period has now been re-
duced back to 22 years for sales
from 1 September 2013.
Social contributions are reduced
over 30 years on a progressive ba-
sis as set out in the table below:
A temporary abatement has also
been introduced for property sales
until 31 August 2014. The abate-
ment is 25% of the capital gains tax
due.
Changes are planned to the rules
relating to sales of development
land as draft changes propose that
any relief available due to length of
ownership on sales of land with
planning permission will cease to
be available from 1 March 2014.
TAX CREDIT FOR
COMPETITIVENESS AND
EMPLOYMENT
The crédit d'impôt pour la compéti-
tivité et l'emploi (C.I.C.E), intro-
duced by the Revised 2012 Fi-
nance Act, is one of the govern-
ment’s high profile measures to
boost the competitiveness of
French businesses. It consists of a
tax credit which is available for off-
set from 2014 against companies’
annual corporate income tax liability
in respect of accounting periods
starting from 1 January 2013.
The CICE will be available to all
French businesses (except the mi-
c r o - e nt e r pr i s e a n d a u t o-
entrepreneur categories) that are
subject to corporate income tax and
who employ staff.
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Period of
ownership
% rate reduction
0 - 5 years 0.00%
6 - 21 years 1.65%
22nd
year 1.60%
+ 22 years 9.00%
VAT type
Current
rate
2014 rate Note
Standard 19.6% 20% -
Reduced 7% 10% (1)
Specific 5.5% 5.5% (2)
Minimum 2.1% 2.1% (3)
EU residents
Charge
Social
contributions
Total charge
19% + 15.5% = 34.5%
Charge
Social
contributions
Total charge
33.33% +15.5% = 48.33%
Non EU residents (subject to country-
specific tax treaties)
Newsletter December 2013

2. Staff costs eligible to be included in
the calculation of the tax credit are
salaries and wages paid during the
years that do not exceed 2.5 times
the legal minimum wage. For 2013,
2.5 times the monthly minimum
wage is €3 575.55 for full-time em-
ployees. The relevant salary data is
collected during the year through
monthly or quarterly social security
declarations and will also be in-
cluded in the 2013 year end salary
declaration (DADS). The tax credit
available in respect of 2013 salaries
amounts to 4% of gross salaries
falling within the above limit. This
percentage will increase to 6% for
2014 salaries.
A specific declaration (N° 2079-
CICE-SD) needs to be filed with the
company’s tax office at the same
time as the remittance advice for
the final instalment of corporation
tax. Thus for companies whose
year end is 31 December 2013, this
filing needs to be made by 15 April
2014. Note that where a company
does not have a December year
end, the tax credit remains calcu-
lated on a calendar year basis; for a
year ended 31 March 2014, the
CICE credit will be based on sala-
ries paid from 1 January 2013 – 31
March 2013 and salaries paid from
1 April 2013 – 31 December 2013.
The CICE tax credit remains avail-
able for offset against corporate
income tax for a period of three
years, after which, any unused
credit can be reimbursed.
Inevitably, some restrictions do ap-
ply as cash benefits derived from
the tax credit are not permitted to
finance an increase in dividends or
salaries for senior management.
EMPLOYMENT LAW CHANGES
The social security circular (N°
DSS/SD5B/2013/344) issued on 25
September 2013 clarified some of
the forthcoming changes applicable
from 30 June 2014 to complemen-
tary healthcare (mutuelle), supple-
mentary pension contributions
(retraite complémenataire) and as-
surance schemes (prévoyance)
arising from the Decrét N° 2012-25
issued on 9 January 2012.
Effective from 30 June 2014:
 In order to be exempt from so-
cial security charges and income
tax as a taxable benefit, health
care and assurance regimes
must be applied on a collective
and obligatory basis by an em-
ployer.
 In order to be collective and
obligatory, the regime must
cover all employees – through
one or more of 5 defined catego-
ries (see below).
 Employer contributions may vary
between the 5 defined catego-
ries but must be uniform for a
given employee category.
 Employees can opt out of the
company scheme if such an opt
out clause is included in the
scheme implemented.
The five categories that may be
applied to differentiate the work
force are set out under Article
R242-1-1 of the Code de la Sécu-
rité Sociale as:
1. Cadres (management employ-
ees) or Non-Cadres (non-
management employees) as
defined under Articles 4 and 4bis
of the Convention Collective Na-
tionale des Cadres dated 14
March 1947 and article 36 of the
Appendix to this Agreement.
2. Remuneration bands and
thresholds as determined for the
calculation of complementary
retirement schemes AGIRC or
ARRCO (based on the CCN 14
March 1947 and Accord Inter-
professional de retraite compli-
mentaire dated 8 December
1961).
3. Employee categories set out
under specific industry or profes-
sional agreements.
4. The sub categories set out by
industry agreements or conven-
tions and defined by level of em-
ployee responsibility, nature of
functions or degree of autonomy
at work.
5. Categories clearly defined in a
non-restrictive manner on con-
sistent custom prevalent
throughout a profession.
What does this mean in practice?
Although collective bargaining
agreements have varied, until now
complementary health care and
assurance as well as supplemen-
tary retirement contributions were
generally limited only to the cadres
c a t e g o r y o f e m p l o y e e s
(management employees), how-
ever in future, where offered, these
must be provided to all employees.
Coverage may however vary de-
pending on the category of em-
ployee. In practice, this will mean
that health care must be offered to
all employees but it is anticipated
that for many companies the level
of coverage will be different based
on the following distinctions:
Length of service cannot be a de-
termining factor, however a mini-
mum period of 6 months (for com-
plementary health care) or 12
months (for supplementary retire-
ment and complementary assur-
ance) may be applied before imple-
mentation, provided this condition is
applicable to all staff.
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Complementary health care:
 Personnel within the scope of
Articles 4 and 4bis of the Con-
vention Collective Nationale des
Cadres 14 March 1947 (cadres).
 Personnel outside the scope of
Articles 4 and 4bis of the
Convention Collective Nationale
des Cadres 14 March 1947 (non
-cadres).
Supplementary retirement contributions
and complementary assurance:
 As above, as well as
 Categories defined by reference
to collective bargaining agree-
ments (in which case all employ-
ees must be covered).
Newsletter December 2013

3. Certain categories of employee
(such as cadres dirigéants, or
agents de maitrise) that do not fall
within the 5 defined categories can
no longer be the sole beneficiaries
of health, assurance or retirement
schemes unless permitted under a
company’s collective bargaining
agreement. In some cases, remu-
neration packages for senior em-
ployees which have included such
schemes will need to be reviewed
as such plans will have to be of-
fered on a wider basis.
Some distinctions cannot be used
to separate employees – full time
vs. part-time; temporary vs. perma-
nent employment contracts; age
and length of service (subject to an
initial minimum period as indicated
above).
Certain exemptions from coverage
do exist:
 Employees who have demon-
strated that they have comple-
mentary health care coverage
already in place elsewhere (for
example via their spouse or part-
ner);
 Employees already present
when a scheme was put in place
by Décision Unilaterale in re-
spect of supplementary retire-
ment, complementary health
care and assurance.
 Employees acquiring dispensa-
tion under collective bargaining
agreements, temporary con-
tracts (CDD) or apprentices who
have contracts in place else-
where and part time employees
and apprentices if the contribu-
tion exceeds more than 10% of
the gross remuneration.
For employers that do not have
obligatory complementary health
care, there is a transition period to
cover professional branch and en-
terprise negotiations. By 1 January
2016, however, all private sector
businesses must have in place a
complementary health care scheme
for their employees.
PART TIME WORKERS –
MINIMUM NUMBER OF HOURS
Effective from 1 January 2014, the
minimum number of hours which
can be offered to part-time workers
under new employment contracts
must be 24 hours per week, or a
monthly/annual equivalent. 3 ex-
ceptions are specified:
 Young persons under 26 years
of age so that the hours are
compatible with the employee’s
studies
 Employees working for tempo-
rary or interim employment
agencies
 Employers who are private indi-
viduals (rather than a business)
For employment contracts already
in place, the requirement will apply
from 1 January 2016. Part-time em-
ployees under existing contracts
can however request this new mini-
mum number of hours before this
date, although an employer may
justify refusal if economic activity is
insufficient.
Note that an industry agreement
may specify a lower number of
hours and an employee may re-
quest in writing to work less than 24
hours due to personal circum-
stances.
In addition, until now overtime
worked on part time contracts cov-
ering the first additional 10% of the
number of contracted hours did not
attract an incremental overtime
rate. From 1 January 2014, unless
there is an industry agreement,
overtime rates must increase by at
least 10% from the first hour of
overtime.
SINGLE EURO PAYMENTS AREA
The Single Euro Payments Area
(SEPA) becomes operational from
1 February 2014. It will permit
cross border transfers within 27
member states of the EU plus Ice-
land, Lichtenstein, Norway, Switzer-
land and Monaco to be made in a
similar manner to which domestic
transfers are currently made at pre-
sent. SEPA transfers, which use
the IBAN and Swift code and permit
a payment motive totalling 140 let-
ters (instead of the 31 currently
available), will be made under norm
ISO 20022XML.
In order to be prepared for the
changeover, it is necessary to en-
sure that certain technical aspects
are respected.
Companies that use software to
generate bank payments (such as
payroll packages) need to ensure
that the version of the software
used is compliant.
For companies who have direct
debit orders with customers in
place, an Identifiant Créancier
SEPA (ICS), which is a unique
identifying number, replaces the
Numéro National d’Émetteur
(NNE).
Existing direct debit authorisations
remain valid but customers need to
be advised of the migration to
SEPA standing orders, indicating
the ICS number, plus a Référence
Unique de Mandat (RUM) which is
attributed to each direct debit in-
struction. A contact address should
also be supplied to which requests
for modifications can be sent re-
garding changes or termination of
the mandate.
In case of any doubts, you should
contact your bank to discuss these
new procedures.
If you have any questions regarding
the contents of this newsletter,
please contact:
Patrick Scanlon
FERRIERES & Co
46 Rue du Général Foy
75008 PARIS
France
info@ferrieres.net
+33 (0) 1 42 94 29 33
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Newsletter December 2013