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Taxation in France

Taxation in France

Updated on Friday 24th September 2021

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Taxation in France applies to any company incorporated in this country or any foreign company managed and controlled from France. Residents and non-residents are taxed on their income derived from activities performed in France. French residents with a foreign-source income are generally not taxed. The most important types of legal entities which are subject to taxes in France are the joint stock company, the limited liability company, the commercial partnership and the branch. Our French lawyers provide complete assistance and accounting services for your business in France.
 

Corporate taxation in France

 

There are several taxes in France a company must pay. These are:
 
  • the income tax on profits, also known as the corporate tax;
  • the business tax;
  • the social surcharge;
  • the social contributions related to employment;
  • the value added tax;
  • withholding taxes.

 

The standard value of the corporate income tax in France is 33.33%. Branches in France benefit from a 30% rate (applicable for branches of non-EU entities) and they can benefit from further reductions or even a complete elimination of this tax under specific treaties. The surtax in France has different values, depending on the value of the income tax. The social surcharge has a value of 3.3%.
 
Interests and royalties and not subject to withholding tax in France. Dividends paid by a French company to a non-resident shareholder are subject to a 30% withholding tax. Dividends paid by French companies to a qualifying EU parent company are exempt from the withholding tax. A participation exemption applies in France under certain conditions.  Other taxes in France applicable to companies are:
 
  • the capital duty,
  • the payroll tax,
  • the real property tax,
  • social security contributions and others.

 

Our lawyers in France can offer you a complete and detailed list of the applicable taxes in France for any kind of business in France.
 

Taxes in France for foreign companies

 
The main taxes in France are:
 
  •  the corporate income tax,
  •  the business tax,
  •  the value added tax (VAT),
  •  withholding taxes,
  •  the social surcharge,
  •  the real estate tax,
  •  the transfer tax,
  •  registration duties,
  •  social contributions.
 
France offers a participation exemption for dividends and capital gains. Also, controlled foreign company and thin capitalization regimes apply. France has signed double tax treaties with more than 100 countries worldwide. 
 
Corporate tax in France must be paid annually and it applies to all French-source profits made by the company, irrespective of the type of company. Resident and non-resident companies in France are taxable in the country on the profits made by their French business. The corporate tax for most companies in France is 33.33%. A surtax of 3.3% applies for large companies and the surtax is calculated when the company’s tax liability exceeds 763,000 euros. 
 

Other taxes in France

 
Stamp duty, customs and excise duties and environmental taxes, as well as other taxes, can apply to companies in France. Our team of experienced lawyers in France can give you more details about the taxation in France for your company, depending on the business field in which you operate.
 
Foreign companies can open a branch in France and this type of company is generally ineligible for tax breaks. Branches are taxed on the income generated in France. The branch tax in France can be reduced under certain conditions.
 
Apart from branches, foreign companies in France can also open liaison offices in France, that is allowed to hire employees, but it is not engaged in commercial activities. The liaison office has the advantage that it does not have to pay the usual taxes. However, it must pay social security for its employees.

 

Personal taxation in France

 

French residents are taxed on their worldwide income and non-residents are taxed only on their French source income. Any individual who has the primary residence in France is considered a French resident. Married couples in France can file a joint tax return. The taxable income for individuals in France includes:

 

  • the employment income,
  • business income,
  • real-estate income,
  • investment income.
  • capital gains.
 
The income tax rates in France are progressive, from 0% to 45%. The value added tax (VAT) in France has a value of 20%. It applies to the sale of any types of goods and services, however, certain reduced rates apply to foods products and preferential rates exist for medicines. The tax year in France is generally the same as the calendar year. Income tax returns must be filed by the end of May, for the previous tax year. Penalties apply for late filing.
 
 

The capital gains tax in France

 

Both companies and individuals are also subject to the capital gains tax which is a levy imposed on the sale of shares (in the case of companies), land and other types of properties, such as buildings. The good news is that the capital gains tax has been reduced and the new rate is set at 19%. With the social surcharge of 15.5%, the total capital gains tax which must be paid by residents and non-residents is now 34.5%.

 

The wealth tax in France

 

Another tax which must be taken into consideration in France is the wealth tax. This levy is payable only for assets worth more than 1,3 million euros. Foreign citizens will be subject to this tax only after 5 years of residence in France. The wealth tax is levied at progressive rates which range between 0.50% and 1.5%. Our lawyers can help you with information about taxation in France.

 

Taxation of non-residents in France

 

Non-residents are liable to pay taxes on the incomes generated in France only. The income tax applicable to foreigners with earnings in France is set at a rate of 20%. With respect to foreign companies paying taxes in France, these will be imposed the same rates as for local companies. However, in order for double taxation to be avoided, France has signed numerous tax agreements through which the elimination of double taxation occurs.

 

Can I choose tax minimization methods in France?

 
Yes, there are tax minimization methods available for companies in France. With the help of our French lawyers, business owners can benefit from a series of strategies and cut the taxes they need to pay in France. The main target of tax minimization methods in France is to reduce the taxation on income, as much as possible, by using the legal opportunities. For instance, the airline tickets, office supplies, fees of directors in France, repairs related to properties, and employee bonuses are the type of expenses that can be considered for tax minimization in a firm in France. Particular tax deductions can be adopted in a form, depending on the business structure. Using the capital gains discount is another tax minimization tools for which you can ask for information. Also, a correct tax planning strategy can be implemented with the help of our specialists in this field. Feel free to discuss all the terms with one of our lawyers in France. They can give advice on tax in France for non residents.
 

Support for VAT registration in France

 
VAT registration is required for companies in France. This is one of the most important taxes imposed in this country, so extra attention is needed. The registration for VAT is not a complex procedure, yet, it is required to have the legal support of a French team of lawyers. The supply of goods worth less than EUR 34,600 is not subject to VAT in France. Yet, the Register of Commerce and Companies in France and particularly the Chamber of Commerce, issues the SIRET number (the VAT code in France) under certain conditions, one of them being related to the VAT representative of the company in France. As soon as the VAT registration is made, and the SIRET number released, the enterprise can activate on the market and issue invoices. All you need to know about the VAT registration and tax in France for non-residents can be solicited from our French attorneys. You can benefit from complete legal advice and guidance, starting from the beginning of your business formation in France.
 
Our team can also help you open a bank account or start a business in France.
 

FAQ about taxation in France

 
1. What is the corporate tax in France?
33.33% is the corporate tax rate imposed in France. However, branches in France are subject to a 30% corporate if from non-EU countries.
 
2. What are the main taxes a company in France must pay?
The corporate income tax, social surcharge, the VAT, the business tax, the withholding tax ad the social contributions enter the attention of companies with activities in France. Other taxes are applicable too.
 
3. Is the withholding tax imposed on interests and royalties in France?
No, there no withholding tax imposed on royalties and interests paid in France.
 
4. Do I need to pay taxes for a liaison office in France?
One of the benefits of a liaison office in France is that there is no need to pay taxes, due to the lack of commercial activities of this kind of entity.
 
5. How are natural persons levied in France?
Foreigners in France are taxed only on the income generated in this country, while nationals are levied on the worldwide income. A joint tax return is applicable to married couples in France. Feel free to ask about the tax in France for non-residents.
 
6. What type of income is taxable for natural persons in France?
The capital gains, employment income, real estate income, business income, and investment income are subject to taxation in France.
 
7. What is the VAT rate in France?
France imposes a VAT rate of 20% on the supply of goods and services. There are lower VAT rates for medicines, food products, the supply of energy, etc. You can discuss with our team of French lawyers all the aspects of VAT, plus tax in France for non-residents.
 
8. What is the wealth tax in France?
The wealth tax is applicable to assets worth more than EUR 1,3 million. In the case of foreign residents in France, this tax applies after 5 years of living in France.
 
9. Do I need a representative for tax registration in France?
Yes, a representative for VAT registration in France is required. One of our lawyers in France can help you. They can also tell you about tax in France for non-residents.
 
10. What is the income tax for foreigners in France?
The income tax imposed on foreigners in France is set at a 20% rate and it is applicable only on the income generated in this country.
 
Here are some facts and figures about the business and economy in France:
 
  1. The total FDI stock registered in France in 2019 was around USD 868.9 billion. 
  2. Most of the FDI inflows are directed to the manufacturing sector, financial, and insurance services.
  3. The World Bank ranks France 32nd out of 190 economies in the world, as stated by the 2020 Doing Business report.
  4. Around USD 17 billion was the total value of the greenfield investments in France.
 
Please contact our law firm in France for more information about the taxes in France and filing requirements.