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The taxpayer can reduce his bill to the tax authorities either through the tax exemption mechanism by investment deduction (financial fees are deducted from the taxable income), or through the tax exemption by reducing the tax paid which corresponds to the direct reduction of the amount of tax payable. In this case, there are two scenarios: a simple tax reduction that is deducted from the tax calculated according to the progressive scale without any refund if the amount of the tax reduction is greater than the amount of the tax, and a tax credit that leads to the recovery of the excess (or all) by the DGF if The tax credit was greater than the tax amount. In this article, discover all the new features of the Finance Act of 2022, which need to be taken into account to properly complete your tax return, with regard to tax reductions and credits.
The tax cut for donations to aid organizations for the most disadvantaged has increased to 75%
Taxpayers’ donations to aid organizations for the poor give taxpayers a tax cut equal to 66% of the amount paid. However, in 2021 as in 2022, this reduction is exceptionally increased to 75% of donations in a total amount less than or equal to 1,000 euros to aid organizations for the most disadvantaged people (compared to a maximum of 552 euros in 2020).
This system comes in addition to the usual system of donations to foundations of public benefit that allows you to benefit from a reduction of 66% of your donation, up to 20% of your taxable income.
For example, by paying 1500 euros to the Red Cross, you can benefit from a 75% tax reduction on 1000 euros and a 66% tax reduction on 500 euros. Thus, you can deduct 1,080 euros from the amount of income tax (750 + 330).
The tax reduction for investments in small and medium-sized enterprises has increased to 25% of the amount invested
In order to support the local economic fabric, investing in unlisted SMEs less than 7 years old and whose main office is located in the European Union or a country in the European Economic Area, under certain conditions and in particular the obligation to hold an individual’s shares for a period of 5 years, gives the right to a tax reduction, usually 18% of the amount invested within 50,000 euros or 100,000 euros for a married couple. But that rate, with the approval of the European Commission, has been boosted to 25% for investments made between March 18, 2022 and March 31, 2022.
Thus, the tax deduction for a person who has invested 50,000 euros in an SME as of March 17, 2022 will be 12,500 euros and 25,000 euros for a married couple.
Note that direct investment in SMEs is not the only possibility. This tax reduction is also valid for your investments in small and medium businesses through crowdfunding as well as via private equity funds such as FIP, FCPI and FCPR. However, investment in small and medium-sized companies through these funds is limited to an investment ceiling of 12,000 euros.
Extension of the tax credit for personal services
To encourage individuals to declare local employees, the individual employer benefits from a tax reduction or tax credit equal to 50% of the amounts paid to his employee within a maximum of €12,000 which can however be increased if the family includes children, persons over 65 years of age or persons Disabled.
The issue of eligibility for certain services performed outside the home (eg picking up children at school, accompanying an elderly person to medical appointments, etc.) By the State Council in 2020, particularly for services rendered abroad, when they are included in a range of services including accommodation activities.
Also note that it is now possible to get a tax credit each month for a one-time payment previously with a one-year lag.
Read also: Capital Income: Any Taxes?
Introducing a new tax credit for installing an electric vehicle charging system at home
Finally, the 2022 Finance Act introduces a new tax cut or tax credit to encourage the switch to electric vehicles. In fact, owners of electric cars or plug-in hybrid cars will be able to benefit from a tax reduction equivalent to 75% of the costs of installing the charging system in their home (primary or secondary residence), up to a maximum of 300 euros.