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What if a middle or upper middle class person bought a stock on the French stock exchange--not his own company, and not in a protected account of any kind, but just made an investment in a French company.  Let's say he invested 100,000 euros and the stock did well, and he sold it two years later for 200,000 euros.  what would he pay in taxes?  In the US as an example, a similar person would pay 15% capital gains tax from a Federal perspective; and if he lived in CA or NY, an additional 10% state income tax.  So the CA person would be $25,000 in tax on the $100,000 gain.

Thanks.

by wchurchill on Sat Mar 31st, 2007 at 01:16:21 PM EST
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I believe the capital gain would be taxed at 27% (16% capital gain tax + 11% social tax).

Even without "protected accounts", you have two ways to pay less or zero tax:

  • if you sell less than 20 000 euros per year of stock, the tax plus social tax rate is exactly zero, so if you rebalance and/or get out "slowly", no tax at all. Note that there is an idiotic gap effect, at 20 001 euros you pay 27% on capital gains. If you can justify a special event like unemployment you may go above 20 000 euros but you have to negociate. After tax and couting social help median yearly income in France is a bit less than 25 000 euros.

  • if you keep your stock after 6 year the capital gain tax is 21.7%, 7 year 16.4%, eight year and after 11% (new law).

This is uncommon as most people just use the protected accounts (you can put up to several thousand euros in there without really annoying constraints).

(I'm just using google.fr here, I'm not a specialist...)

by Laurent GUERBY on Sat Mar 31st, 2007 at 01:44:44 PM EST
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thank you for doing this.  So the US and France are different, but bottom line, maybe not so different on capital taxes.  The 27% would compare to 25% in the US, for many large states such as California and New York--US lower in some states, like Nevada with no state income tax.

both have some protected account features, the ones you have mentioned before plus the benefits for smaller sales annually.  US has ira's and 401k's that have their biggest benefits (% wise) in the middle class and below--as long as people choose to use them.

I'm under the impression that fewer in France invest in stocks, however.  In the US it's well over 50% now.  I'm kind of assuming that French pensions are better than US social security, and therefore the French have less reason to invest.  Is this your impression as well--on both points?

by wchurchill on Sat Mar 31st, 2007 at 04:09:19 PM EST
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I believe direct ownership of stocks is about 6-7 millions people in France (10% of the whole population).

But if you look at Assurance Vie, 59% of households (22 millions people) have position in Assurance Vie (can be bonds or stocks or whatever - I have some commodities and derivatives in mine).

http://www.cnp.fr/Epargne/Magazine/art_1793.htm

There are about 7.5 millions PEA (plan d'epargne en action) in France, 59% of it is in index/managed fund (OPCVM) and 41% in direct stocks.

http://www.lemoneymag.fr/v4/fiche/s_Fiche_v4/0,5382,13303,00.html

I don't know how many people end up owning stock directly or indirectly in France.

Where did you get the US data from?

by Laurent GUERBY on Sat Mar 31st, 2007 at 06:32:32 PM EST
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It's talked about quite a bit in the US.  I just googled and here is the first hit, which happens to be from business week in2005 and quotes 50%.  Recently I've heard the number of well over 50%--which probably meant 51%--if it was 55 they would have said 55%.

I guess in American lingo though, we probably would count that Assurance Vie holding as stock ownership--that is if it's like our ira's and 401k's.  In these accounts you have a choice as to how much money to put in, (though there is a maximum), and you have choices as to how to invest the money.  Choices may range from almost all choices (for example I own 10 stocks in individual companies and three mutual funds in an IRA), to some company plans where you could be limited to choosing between 5--10 mutual funds.  So if Assurance Vie is like that, we would call that direct ownership.

by wchurchill on Sat Mar 31st, 2007 at 07:24:06 PM EST
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Well may be then France has more than 60% stockholders...
by Laurent GUERBY on Sun Apr 1st, 2007 at 06:05:26 AM EST
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my french is not great, and as I followed along the best I could, it sounded like an American life insurance policy.  Wikipedia was in English, and confirmed that.  These vehicles would not be included as direct stock investment in the US.  In the US they provide a multiple service of making payouts to your beneficiaries when you die, and if you live a long time they will provide some benefits.  In the US they do not allow you to select specific stocks, or mutual funds.  They really don't allow regular management of your portfolio.  Nor do you get the full return on your investment, since a big part of the benefit is the safety they provide for one's family in case of premature death.
by wchurchill on Mon Apr 2nd, 2007 at 02:02:22 PM EST
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French "assurance vie" has no longer anything specific about death events, it's just a tax lowering mechanism. I can get my money out when I want. It also has zero inheritance tax up to some amount to someone of your choosing.
by Laurent GUERBY on Wed Apr 4th, 2007 at 06:26:39 AM EST
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