Tax regimes

Tax on dividends

With effect from January 1, 2005, dividends received by our shareholders are no longer entitled to the avoir fiscal tax credit. However, for individuals resident in France for tax purposes, personal income tax on dividends distributed by:

• French companies liable to corporate income tax
• or foreign companies registered in countries with which France has a tax treaty liable to corporate income tax     

is due only after applying a 40% tax-free allowance. 

In addition to the 40% tax-free allowance, taxpayers are also entitled to a fixed annual tax-free allowance set at:

• €1,525 for single, widowed or divorced people and married couples taxed separately,
• and at €3,050 for married couples or couples in a civil union who are taxed jointly.     

If this fixed allowance exceeds the taxed income, the difference will not be paid to the taxpayer and may not be carried forward to the following year.

Dividends qualifying for both these allowances are also entitled to a tax credit amounting to 50% of the amount of distributed income before deducting the allowances. This tax credit is capped at:

• €115 for single, widowed or divorced people and married couples taxed separately,
• and at €230 for married couples or couples in a civil union who are taxed jointly.     

If the tax credit exceeds the tax owed, the difference will be paid to the taxpayer.

Dividend income is also liable to social contributions at a rate of 11% that are calculated on the income before applying the 40% tax-free allowance.  

Capital gains tax on disposals of shares

Capital gains tax is not payable on disposals of shares unless the annual amount of disposals (before deducting charges incurred on the disposal) exceeds a threshold set at €20,000  per taxable household for disposals realized in 2007, contrary to €15,000 in 2006. If this threshold is exceeded, all capital gains are taxed at a rate of 27% (16% plus 11% for social contributions).

The tax credit grows proportionally to the ownership period. Starting January 1, 2006, a relief is granted on capital gains arising from disposals of shares in European companies. This relief amounts to one-third of the capital gain for each year of ownership after the fifth year, such that the gain becomes fully exempt after eight full years of ownership. Shares acquired before 2006 are deemed to have been acquired on January 1, 2006. In practice, the relief will only start to apply to disposals made after January 1, 2012; full exemption will apply after January 1, 2014.

However, the base for calculating social contributions of 11% is the total realized gain; in other words, it excludes this relief.  

Tax regime for “PEA” share savings plans

The French “PEA” share savings plan offers better tax planning opportunities than an ordinary securities account, because it enables investors to hold shares in companies liable to corporate income tax while enjoying exemption from tax on dividends and capital gains, provided that no withdrawal is made during a certain period of time.

The amount of cash that can be paid into the plan is capped at €132,000 (€264,000 for a couple). In the event of partial or full withdrawal within the initial 8-year period the savings plan will be cancelled.  

French wealth tax (Impôt de Solidarité sur la Fortune – ISF)

For ISF calculation tax purposes, a taxpayer has to declare the value of the shares he is holding. To calculate the value of his sanofi-aventis shares he can elect to report in his/her tax return:

• the last known share price before January 1 of the tax year: €69.95 on December 29, 2006
• or the average of the last 30 closing prices: €67.88 for 2006