Before the ink was dry on a proposal to add one point to the rate of capital gains tax, it seems it is to rise even further.

In our last Newsletter we reported that the draft finance bill for 2011 proposed an increase in capital gains tax on real estate and shares.

The proposals envisaged an increase from 16% to 17% on real estate and 18% to 19% for share sales.

Within the last few days the Elysée Palace has announced that it is proposed to align the rate of capital gains tax on real estate to that of shares.

In addition, it is also proposed to increase the level of social charges payable on capital gains from 12.1% to 12.3%.

This will mean that with effect from 1st January 2011 the rate of capital gains tax for both real estate and shares will be 31.3% (19% + 12.3%), although non-residents are not liable for the social charges.

The current rate of capital gains tax on real estate is 28.1% and on shares it is 29.1%.

The increases are being proposed in order to fund the concessions the President is having to make in the reform of retirement pensions.

In particular, the income from the increase in the tax will fund concessions in the pension entitlement of mothers of three or more children and families with disabled children.

The proposals have yet to be approved by the French Parliament.