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2.

Income tax system

for residents of Saint-Martin

Principle

Saint-Martin tax regulations identify several categories

of income or profits such as “property income” (income

from rental properties) or “wages and salaries” (remune-

ration derived from employment).

The determination of net income for each category is

made according to rules specific to each category.

Hence, the gross income of employees is reduced by

compulsory social security contributions, plus any benefits

in kind. Net income for that category is then obtained

after deducting professional expenses that are either

fixed at a flat rate of 10%, or determined on the basis

of a statement of actual justified costs.

Category outcomes are then aggregated to determine

the total net income, which can potentially be reduced

by certain expenses such as alimony.

Income tax is calculated by application to total net

household

taxable income of the progressive scale

adjusted according to the family quotient.

The calculated income tax can then be reduced by a

set of tax deductions or tax credits; the effects of the

family quotient may also be capped.

Family quotient

The family quotient takes into account the family situation

of taxpayers and consequently reduces the progressive

impact of income tax.

It works by assigning to each tax household a number

of units depending on the number of people associated

with the household.

The single taxpayer, divorced or widowed, without

dependent children has a single unit.

The married taxpayer without dependent children has

two units.

The married taxpayer with a dependent child has two

and a half units; two children entitle them to three units;

and they are entitled to four units for three children, and

so on, each dependent from the third one on qualifying

them for an additional unit.

The effective tax rate is calculated based on the

taxable

income of the tax household divided by the num-

ber of units corresponding to the family quotient

of the taxpayer. The progressive scale of tax for one

unit of income is then applied to the amount of each

unit of income.

The resulting figure is then multiplied by the number of

units to obtain the total amount of gross tax.

Calculation of the tax

For the purposes of income tax for the year 2013, the

progressive rate of income tax of the

Collectivité

of

Saint-Martin for one unit is as follows:

Fraction of taxable income

Rate

Not exceeding €6,011

0%

From €6,011 to €11,991

5.5%

From €11,991 to €26,631

14%

From €26,631 to €71,397

30%

More than €71,397

41%

Gross tax can be adjusted by application of the capping

effects of the family quotient, the tax benefit cap per

half-unit being added to the two units for married tax-

payers, hence amounting to €2,355 for 2013 incomes.

Gross tax gives rise to an overall deduction of 40%,

up to a maximum of €6,700.

Other tax deductions

The amount of tax calculated can also be further reduced

by a set of special tax deductions such as:

uu

tax credit for amounts paid to an employee in the home;

uu

or tax credit for childcare costs.

Tax credit enabling double taxation to be

offset, even in the absence of a tax treaty

The

Collectivité

of Saint-Martin has not entered into any

treaties against double taxation with States or territories

other than the French State, even though tax residents

in Saint-Martin may receive their income from a source

outside the

Collectivité

and may be taxed by the territory

or State in which the income is derived (this is the case

for revenue originating in the United States, etc.).

In order to avoid double taxation of these incomes that

have to be included in the tax base in Saint-Martin and

declared as such,

Saint-Martin tax rules provide a

unilateral tax credit mechanism

(not treaty) with

respect to tax paid by a taxpayer living in Saint-Martin to

a State or territory outside Saint-Martin under a positive

income that has its source in that State or territory.

27

JUNE 2014 EDITION

TAX INCENTIVES FOR YOUR EMPLOYEES