By Jean-Sébastien Dumont

Residents are liable for wealth tax on their worldwide assets when their net fair market value exceeds € 790,000. Non-residents are only liable for wealth tax on their assets physically located in France to the extent that their net fair market value exceeds € 790,000.

Since 2008, both French residents and non French residents who are subject to wealth tax in France can benefit from a wealth tax reduction granted for contributing to the share capital of Small to Medium-sized companies (SMEs) based either in the European Union, Iceland or Norway.

The only investment to share capital which give rise to the reduction in wealth tax are those made in companies which fulfill the EC definition of a Small to Medium-sized company and which carry on notably an industrial or commercial activity (save for property and investment companies).

Investment in the share capital of SMEs in a completion, start-up or expansion phase, for the purposes of the wealth tax reduction, is capped at 1.5 million Euros per twelve-month period. Recently, the amended tax bill for 2009 (decree n°2009-418, April 15, 2009) temporarily increased the capped amount to 2.5 millions Euros per twelve-month period from January 1, 2009 till December 31, 2010.

Wealth tax reduction corresponds to 75% of the amount invested directly or indirectly in the share capital of SMEs, limited to € 50,000 per year.

Such wealth tax reduction implies the continuous ownership of the shares until the end of the fifth calendar year following the year of the investment.