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AGENCE FRANCE TRESOR is tasked with managing the government debt and cash positions under the most secure conditions in the interest of the taxpayer.
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Tax treatment of government securities  
Tax treatment of government securities 1 - Taxation of French government securities traded in the cash market

Fungible Treasury bonds (OATs) and government bonds (emprunts d’État)

French residents

For individuals liable to income tax, interest on fungible Treasury bonds (obligations assimilables du Trésor: hereafter OATs) and government bonds (emprunts d’État) received up to and including 31 December 2012 was subject to progressive income tax or, if the taxpayer so opted, a flat-rate withholding tax of 24% (excluding social contributions). This optional levy was abrogated by Article 9 of the 2013 Budget Act (no. 2012-1509 of 29 December 2012) for interest earned on or after 1 January 2013.

Accordingly, since 1 January 2013, interest on OATs and government bonds received by individuals domiciled in France is, with some exceptions (see below), liable to progressive income tax in the year following its receipt after being subject, in the year of receipt, to a withholding tax (“advance payment”) of 24%, plus social contributions on investment income1 levied at a rate of 15.5%. This advance payment is then deducted from the tax calculated at progressive rates. Any excess is refundable.

The withholding tax is due in the first fifteen days of the month after the month in which the income was received and is offset against the income tax due for the year in which it was withheld (income tax paid the following year). If it exceeds the tax due, the overpayment is refunded.

The following categories of individuals, however, are not liable to the withholding tax:

a - Individuals domiciled in France who receive interest on OATs and government bonds from an institution established in France, and who belong to a tax household whose taxable income (revenu fiscal de référence: RFR) in the next-to-last year is less than €25,000 for individual taxpayers or €50,000 for taxpayers filing a joint tax return. Requests for exemption from the withholding tax must be filed no later than November 30 of the year preceding the year in which the interest is paid.
To request the exemption, the taxpayer must file a sworn statement with the institution indicating that the taxable income figure on the income tax notice of assessment for the next-to-last year preceding the payment of interest is less than €25,000 or €50,000, whichever amount is applicable2;

b - Individuals domiciled in France who receive interest on OATs and government bonds from an institution established or domiciled outside France, and who belong to a tax household whose taxable income in the next-to-last year is less than €25,000 for individual taxpayers or €50,000 for taxpayers filing a joint tax return.

If the total income from fixed-income investments, including interest on OATs and government bonds, received for a given year by a tax household does not exceed €2,000, the taxpayer may opt for a flat-rate income tax of 24%. The taxpayer must choose this option when filing his or her general income-tax return. When the income payments exceed €2,000, they are liable to a tax assessed on the progressive income tax rate schedule.

Debtors established or domiciled in France are liable to a flat-rate withholding tax of 75% on such investment income when the income is paid in a Non-Cooperative Country or Territory (NCCT)3 (Section III of Article 125 A of the General Tax Code). The 75% rate applies to income received on or after 1 January 2013. For income received before that date, the rate was 50%.

Note: Redemption premiums attached to negotiable bonds issued in France with the authorisation of the Minister for the Economy and Finance are tax-exempt with the following exceptions:
- Premiums attached to bonds issued since 1 June 1985 when they exceed 5% of the face value;
- Premiums distributed or allocated since 1 January 1989 by an undertaking for collective investment in transferable securities (UCIT) (mutual funds in the French SICAV and FCP categories) covered by Articles L214-2 et seq. of the Monetary and Financial Code, when the premiums exceed 10% of the amount distributed or allocated;
- Redemption premiums defined in Section II of Article 238 septies A of the General Tax Code.

Consequently, the tax exemption for redemption premiums under Section III of Article 157 of the General Tax Code does not apply to the following:
- Government bonds issued since 1 January 1992;
- Government bonds stripped since 1 June 1991;
- Bonds issued in consecutive tranches and listed as a single instrument on the bond market if a tranche of the bond was issued after 1 January 1992 and paid for on or after 1 January 1994.


Capital gains on sales by individuals of OATs and government bonds are liable to income tax at the following rates:
- A flat rate of 24% for sales completed in 2012 (plus 15.5% in social contributions4);
- Progressive income tax schedules for sales completed on or after 1 January 2013 (plus 15.5% in social contributions).

Losses can only be offset against capital gains realised in the same year or the next ten years.

Non-profit organisations: The tax liability differs according to whether or not the organisation engages in profit-making activities:
    - If the income received is booked to the non-profit sector of the non-profit organisation: income from government bonds issued on or after 1 January 1987 is taxed at the reduced corporate income tax rate of 10%, and capital gains on sales are exempt from corporate income tax.
    - If the income received is booked to the profit-making sector of the non-profit organisation, or if the non-profit organisation is liable to corporate income tax on all its activities: income is taxed under the rules described below applying to legal entities liable to corporate income tax.
Legal entities liable to corporate income tax: Interest, redemption premiums, and capital gains on sales of securities are included in the assessment of earnings by the recipient companies and are liable to corporate income tax under the standard provisions (33.33% plus, where applicable, a 3.3% social contribution and a 10.7% special levy).
Interest paid on OATs is taxable on the basis of accrued interest. However, for securities with redemption premiums, this premium and the interest paid each year are taxed for each financial year on an accrual basis when the average issue price of such securities is less than 90% of their redemption value and if the premium exceeds 10% of the purchase price.

Sole proprietorships and partnerships: Interest is deducted from the earnings of the business or company and liable to the income tax on securities income owed by the individual operator or individual partners (see income-tax rules described above). Corporate income-tax rules apply to the partner legal entities that are liable to corporate income tax.

Inflation-indexed OATs (OATis)

The taxation of inflation-linked OATs is very similar to that of other fixed- and floating-rate OATs for individuals liable to income tax and professionals liable to corporate income tax (see taxation of OATs and government bonds above).
Only the coupon actually received is taxable each year. Capital gains are taxed when the security is sold or on maturity, when the security is redeemed with the inflation-adjustment premium.

Institutional investors are taxed under the provisions of Article 238 septies E-II-3 of the General Tax Code, which concerns securities with uncertain redemption premiums:

- As with private investors, tax is due on interest received. In contrast with private investors, however, the redemption premium due to indexation of the principal may be taxed partly before maturity, even though this premium is collected only on disposal or redemption on maturity.

- The redemption premium is factored into pre-tax income on a yield-to-maturity basis, spread in accordance with section II.3 of Article 238 septies E of the General Tax Code (paragraphs 2, 3, 4, 5 and 6), when its estimated value (based on the monthly government-bond rate [TME] at the purchase date) exceeds 10% of the purchase price and when the average issue price is less than 90% of the estimated redemption value. In practice, this criterion is easy to meet for inflation-indexed bonds when subscribed on or shortly after issue.

- Every year, only a fraction of the inflation-adjustment premium is taxed. This fraction is calculated in such a way as to amortise the residual taxation of the premium (taxable premium less taxes paid in earlier years) over the residual life of the security.

Fixed-rate Treasury notes with interest paid annually (BTANs) and fixed-rate Treasury bills (BTFs)

Individuals liable to income tax: The taxation of BTANs and BTFs is very similar to that of OATs and government bonds (see above).

Non-profit organisations. The tax liability differs according to whether or not the organisation engages in profit-making activities:
    - If the income received is booked to the non-profit sector of the non-profit organisation: income from BTANs and BTFs issued on or after 1 January 1987 is taxed at the reduced corporate income tax rate of 10%, and capital gains on sales are exempt from corporate income tax. ).
    - If the income received is booked to the profit-making sector of the non-profit organisation, or if the non-profit organisation is liable to corporate income tax on all its activities: income is taxed under the rules described below applying to legal entities liable to corporate income tax.
Legal entities liable to corporate tax, sole proprietorships, and partnerships: the taxation of BTANs and BTFs is identical to that of OATs and government bonds (see above).

Non-residents

Interest on OATs and government bonds is tax-exempt provided that it is not paid in a Non-Cooperative Country or Territory (NCCT)5, regardless of the recipient’s place of residence. Pursuant to Section III of Article 125 A of the General Tax Code, if such income is paid in an NCCT, it is liable to a 75% tax. When applicable, the income is liable to a withholding tax of 15% or 17% for securities, bonds, and redemption premiums issued before 1 January 1987.

2 - International Tax Treaties with France

See international tax treaties between France and other countries.




1 Interest and redemption premiums on OATs and government bonds are liable to total social contributions of 15.5% (including CSG, CRDS, and other levies) on investment income.
2 For income received in 2013, and as an exception to the standard procedure, the sworn statement may be filed with the institution no later than 31 March 2013 provided that it applies to income paid on or after the date it was written.
3 Since 1 January 2014, the following countries and territories are classified as NCCTs: Botswana, the British Virgin Islands, Brunei, Guatemala, the Marshall Islands, Montserrat, Nauru and Niue.
4 Capital gains on sales of OATs and government bonds are liable to total social contributions of 15.5% (including CSG, CRDS, and other levies) on investment income.
5 Since 1 January 2014, the following countries and territories are classified as NCCTs: Botswana, the British Virgin Islands, Brunei, Guatemala, the Marshall Islands, Montserrat, Nauru and Niue.