Some French film stars may feel the need to seek Russian tax exile, but it is pretty much plus ça change on income tax for the rest of us in 2013.

A summary of the main changes in impôt sur le revenu for this year is set out below.

i. Income Thresholds

For the second year in succession income thresholds for each tax band will not be adjusted in line with inflation.

However, in order to mitigate the effects of freezing of the thresholds on those who pay less than €960 in income tax (over 50% of the population), the discount (la décote) that is used to lower taxes imposed has been increase by 9% to €480. You can refer to our tax guide for an explanation of how this works.

In addition, for those aged over 65 years, and disabled persons irrespective of age, the income threshold for the fixed sum abatement against income tax has been increased. This abatement is in addition to the 10% allowance before calculation of liability to income tax. The fixed sum is €2,312 for those whose income does not exceed €14,510, and €1,156 for those whose income is between €14,510 and €23,390. These allowances are doubled for a couple each aged over 65 years.

ii. Tax Bands and Rates

A new income tax rate of 45% has been introduced for those whose annual income is over €150,000 per person.

This means that for a married couple with two children their annual income would need to be in excess of €450,000 before they became liable for the tax at this rate.

The rate will apply on income earned in 2012, but taxable in 2013, as income tax is collected in arrears in France.

The tax bands and rates for 2013 (for income earned in 2012) are as follows:

These tax bands are applied on a proportional basis to the number of persons in the household. So for a couple the number of houshold 'parts' (or shares) would be 2. Assuming a net income of €30,000, then the value of each part is €15,000. The income tax payable on €15,000 would then be assessed, and the resultant figure multiplied by 2.

Given the general discounts and allowances used to calculated tax payable, a retired couple under 60 would need to have an income of around €20,000 a year before they paid any income tax at all, and for a couple over 65 years of age it rises to over €21,000.

iii. Contribution Exceptionnelle sur les Hauts Revenus

Although the French Constitutional Council (CC) declared illegal the proposed rate of income tax of 75% with those of incomes in excess of €1 million, there remains in place a similar tax.

This tax is called the contribution exceptionnelle sur les hauts revenus introduced in 2012. It is collected and paid alongside income tax.

This rate of the tax is 3% on income between €250,001 and €500,000, while those with an income above €500,000 pay at the rate of 4% on any income above the threshold.

Married couples and those in a civil partnership are exempt up to €500,000, when they then become liable at the rate of 3% to €1m, and 4% above this figure.

The tax is imposed on net income, after determination of the tax liability under the standard scale rates.

The French government has also indicated that it will introduce a new, revised tax on those earning over €1 million a year. This is despite the fact decisions of the CC cannot be overturned. Accordingly, substantial modification of the original proposal will be required in order for it to overcome legal hurdles.

iv. Tax Reliefs

Tax reliefs have been reduced for 2013 income, as follows:

a. A reduction in the maximum allowance under the quotient familial (which reduces your tax liability the larger the household) has been reduced from €2,300 to €2,000 for each dependant. A couple with one child would need to earn around €70,000 to be affected by this measure.

b. The maximum annual tax relief (crédits d'impôts/ réductions d'impôts ) that can be granted has been reduced to €10,000 (against €18,000 currently) a measure that again will affect only those with substantial incomes.

c. The general abatement against income tax of 10% for professional costs of business owners and employees has been capped at €12,000 against €14,147 currently. In a related change, company owners who are majority shareholders will no longer be entitled to a 10% allowance for professional costs against liability to their social security contributions.

v. Investment and Savings Income

There have been changes to the taxation of dividends and other investment and savings income.

One of the objectives of the reform is to integrate the taxation of such earnings from capital within the main system of impôt sur le revenu.

Those whose annual income from such savings, dividends etc is over €2,000 will no longer be able to opt for the withholding tax of 24% (21% for dividends), a change that will only affect those on substantial incomes. All the income will be assessed according to your relevant marginal rate of income tax, as part of total income. Social charges of 15.5% will continue to be payable.

Nevertheless, in order to avoid a lag effect in the collection of revenue, interest will be taxed at source at the rate 24%, with final determination of the actual amount payable assessed as part of the tax return in the following year. On application to your bank you can obtain waiver of this witholding tax on interest earned, provided your net income in the previous year was lower than €25,000 (€50,000 for a couple). The same applies to dividends, at the rate of 21%, but at income thresholds of €50,000 and €75,000.

This change will operative for income earned in 2013, as the retroactive nature of the measure to 2012 proposed by the government was declared illegal by the Constitutional Council.

On dividend payments, the personal allowance of €1,525 (€3,050 for a couple) is abolished, although dividends continue to benefit from a general abatement of 40%.

In certain circumstances company owners who use dividends as a method of remuneration will be subject to social security contributions at the rate of around 45% on these dividends. Previously they were only subject to the social charges, which this year is at the rate of 15.5%. The contributions will be levied on the gross dividend, before the normal 40% abatement. The full panoply of social security contributions will apply where majority shareholder company owners and members of their family receive dividends exceeding 10% of the share capital of the company. Dividend payments below 10% will continue to be subect to 15.5% social charges. The change is operative 1st January 2013.

On the sale of shares, for 2012 capital gains tax will be at the rate of 24% (plus 15.5% social charges) and not 19% as is currently the case. From 2013 the capital gain will be taxed as part of the income tax system, with relief granted for the number of years the shares have been held. Relief will be granted at the rate of 20% for shares held between 2 and 4 years; at 30% if held between 4 and 6 years, and 40% from year 6.

On a conditional basis, new business start-ups will continue to be able to opt for 19% capital gains tax on the sale of their shares.