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Corporate Tax in France - Legal Advice for Foreign Investors

Corporate Tax in France

Updated on Friday 03rd September 2021

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The corporate tax in France is levied on all the France-sourced profits made during a year by corporations and other legal entities. The companies that are fully liable for the corporate tax are those domiciled of managed in France. The standard 33.33% corporate tax in France has a surtax of 3.3% which leads to an effective tax of 34.43%. The corporate income tax is just one of the taxes companies must pay while doing business in France. Our French law firm offers complete services for French companies, including tax management and tax minimization.
 

Types of companies subject to corporate tax in France

 

The main types of companies in France are:
 
  • the joint stock company (SA/SAS),
  • limited liability company (SARL),
  • commercial partnership (SNC)
  • branch of a foreign company.
 
The 3.3 percent contribution applies to the part of the corporate income tax that exceeds 763,000 EUR, resulting in an overall maximum corporate income tax of 34.43 percent. Large companies that have a turnover of over 250 million EUR must pay an additional 10.7 percent temporary surtax. This means that the overall effective corporate tax for large companies is 36.9% or 38%.
 
Because France operates a territorial tax system, residents and non-residents are subject to taxation based on the profits produced by a business in France or on an income generated from a French source. As such, if a company is opened in France or if a foreign company is managed and controlled in France, then it is subject to corporate tax.
 

How does France apply the corporate tax?

 
The corporate tax in France, known as ”Impôts sur les societés”, is governed by the French company taxation system. This system makes a clear distinction between the income generated by the company and the income generated by the company owner. In case of the owner, the income is regarded as being salary and it is taxed using the personal income tax system that is also deductible in order to calculate liability to company tax.
 
In regards to the company income, the rate is calculated depending on the capital structure of the business as well as on the turnover. The net taxable profit of the company is the trading income and is calculated according to the yearly financial statements of the company.
 

The deadline for paying the corporate tax

 
In France, the fiscal year is generally the same as the calendar year. However the taxpayer can choose a different end date for the year. Usually the tax year has 12 months but can be shorter or longer in some cases. The corporate tax returns in France are due until 30 April, the following calendar year or within three months of the end of the year if the fiscal year is not the same as the calendar year. Late payments in France are usually subject to a 10% penalty.  
 

Modifications of the Finance Law in France in 2020

 
The Minister of Economy and Finance in France announced in 2018 a planned phased-in reduction that implicates the corporate income tax in this country. The main target is to reduce the corporate income tax to 25% by the end of 2022. Large corporate taxpayers in France are on the list of companies that will benefit from a reduced corporate income tax, especially if revenues equal to or larger than EUR 250 million are declared. At the moment, the standard corporate income tax rate is set at 31% for the 2020 fiscal year, while the 28% tax rate is imposed on the first EUR 500,000 taxable profit for the fiscal year started in January 2019 or after. However, the relevant corporate income tax rate remains at 33⅓% for the fiscal years opened on or after 1 January 2019. It is important to note that the transition to the 31% corporate tax rate starting with 2020 is the first corporate income tax rate decrease on the entire profit of big enterprises in more than 20 years in France.
 
For a better understanding of the new modifications of the Finance Law in France, you are invited to discuss one of our French lawyers. Here is a chart that explains more:
 
 
Fiscal Year Company profits - Tax rates
January 2019
Between EUR 0 – EUR 500,000 - 28%
Between EUR 500,000 and EUR 250 million - 31%
More than EUR 250 million 33.3%
January 2020 Equal or more than EUR 250 million - 28%
January 2021
Up to EUR 250 million - 26.5%
Equal or more than EUR 250 million - 27.5%
January 2022 All profits levied at a 25% rate
 

 

Modifications of the withholding tax in France

 
The same 2020 Finance Law also explains that the rate of specific tariffs or withholding taxes imposed on dividends, specific non-wage profits, sums paid in return for artistic services, capital gains realized by European companies as well as capital gains of enterprises from the EU from the sale of considerable contributions matches to the corporate income tax rate applicable to companies with incomes that do not exceed EUR 250 million. Here are the new tax rates, according to the modifications of the Finance Law in France:
 
  1. For 2019 — 31% (for all companies In France, irrespective of the amount of the income) although the 30% rate is the withholding tax imposed on dividends.
  2. For 2020 — 28% rate for all levies and withholding taxes.
  3. For 2021 — 26.5% rate for all levies and withholding taxes.
  4. For 2022 — 25% rate for all levies and withholding taxes.
 
All the details you need about the taxation in France and particularly about the modifications of the corporate income tax in France can be solicited from our team of lawyers in France.
 

Tax minimization in France

 
Company owners in France should consider the implementation of different tax minimization tools to cut the amount of taxes in their firm. These tax strategies must comply with the French Taxation Law and the obligations imposed. There are different business expenses that can be deducted, such as, the fees of directors in France, office supplies, employee bonuses, or airline tickets. Also, the participation exemption is applicable to capital gains that are derived from the share sale part of substantial investment in the firm. Charities are also tax minimization methods that can be implemented, but for a better understanding of the tax minimization instruments available in France, feel free to talk to our specialists.
 

Reduced CIT in France

 
The definition of French Tax Law states that small companies in France benefit from a reduced corporate tax of 15%. This rule applies to the first EUR 38,120 of taxable profits. The good news is that such a tax also applies to companies with a turnover of up to EUR 10 million, but for more details, you can talk to one of our lawyers in France who can tell you more about recent changes to the law.
 

Tax exemptions in France

 
There are cases in which companies are exempt from paying the corporate tax, but only if certain conditions are fulfilled. For example, regions, departments, municipalities, investment companies, housing or farmers associations, that have as the main scope making goods available to their members, fit into the tax exemption category.
 

Branch remittance tax in France – What you need to know

 
Normally, the tax on remittance of the branch is not applicable if the foreign company has its business and administration place in a member country of the European Union and more precisely in a country where that company is subject to corporate tax, without any possibility to be exempt from tax or any option in this regard.
 
This is mentioned by the amendments to the 2020 legislation. However, there are refund choices if the company can prove that the beneficiaries of these distributions have their tax residence in France and that the amounts corresponding to the withholding tax have been transferred to them. More information on these issues can be detailed by our lawyers in France.
 

Investments in France

 
France is open to foreign investments of any kind. It is a known fact that the country has a powerful economy that attracts numerous international entrepreneurs on a yearly basis. Moreover, business conditions are quite appealing. The ease of company registration with the lack of formalities, plus the tax regime weigh much at the time an investor decided to business in France. The double taxation treaties signed by France with countries worldwide are extremely important because the profits of companies are protected against fiscal evasion and money laundering. Plus, the infrastructure in France, alongside the multitude of business possibilities, allows international investors to set their activities without any concerns.
 
Those interested in the ways the business is registered in France can talk to one of our French lawyers who can also explain the taxation in France and other related aspects. We can help you with the company incorporation, tax compliance in France, mergers, and acquisitions, EORI and VAT registration, litigation, property purchase, and many more.
 
In addition to those mentioned above, you will also find some data and statistical figures that show the economic direction of France:
 
  1. Around USD 869 billion was total FDI for France in 2019.
  2. The value of greenfield investments in the same year was approximately USD 18 billion.
  3. In terms of business simplification, France remained 32nd out of 190 of the world's economies, according to the 2020 Doing Business report.
  4. Most foreign investments are absorbed by the manufacturing sector, financial and insurance services, real estate.
  5. Paris remains the top destination for foreign investors who want to generate profits in France. The French capital is home to many foreign companies.
  6. The UK, the Netherlands, Luxembourg, and Switzerland are the main foreign investors in France.
 

Frequently Asked Questions

 
We often get questions about the tax system in France, and foreign entrepreneurs who want to set up business in this country can find out the answers below. We remind you that everything you need to know about corporate tax in France can be discussed with our specialists in the field.
 
1. What income tax applies to profits of up to EUR 500,000?
The 28% corporate tax is the rate that applies to companies with profits of up to EUR 500,000. There are other rates depending on the profits registered by a company in France.
 
2. What is the corporate tax in France for companies with a profit of up to EUR 250 million?
In the case of companies with profits of up to EUR 250 million, the corporate tax rate is 26.5%. But if the companies have higher profits than this amount, then a tax of 27.5% rate is applied.
 
3. What corporate tax rate will be applied starting with 2022?
According to the latest changes in legislation, the corporate tax rate in France will be 25% for all types of profit. But it is important to discuss with our lawyers in France and to find out in detail what the new tax regime in this country entails.
 
4. Is there a lower corporate tax rate in France?
Of course, a corporate tax rate of 15% applies to small companies, for the first EUR 38,120. And this is a change to the legislation on taxes to be paid in France in 2021.
 
5. Is it possible to reduce the cumulation of taxes payable for a company established in France?
Of course, tax minimization tools are valid for companies in France. Thus, expenses related to bonuses, office supplies, or fees of managers can be deducted. We emphasize that you can benefit from the support of our team of specialists if you want extra details about tax minimization for a company based in France.
 

Working with our lawyers in France

 
What is important to know before collaborating with our specialists is that our clients can benefit from complete guidance for the problems they bring to our attention. Professionalism, experience, efficiency, and trust are important things for us and we rely on them when we offer strategies and solutions to our client's problems.
 
A correct communication will be established from the very beginning so that you can enjoy the right results. So, if you want support for registering a company, for paying taxes, or for obtaining the right licenses for the business you own, do not hesitate to talk to us and find out how we can help you.
 
Do you want to open a company in France? Feel free to contact our French lawyers and they will provide the necessary information. Our law firm in France will help you go through the entire process and offer you an easy way to start doing business in France.