The main company taxes in France are corporate tax (“Impôt sur les sociétés”), value added tax (“TVA”), property tax (“Taxe Foncière”) and “business” tax (CVAE and CFE).
For individuals, there is established a single annual tax on the income of individuals referred to as “income tax”. It is a tax on the total net income obtained by adding the income of all categories such as: property income, Industrial and commercial benefits, Profits from farming; Wages, salaries and income from movable capital. The Income subject to tax is net income free of related expenses. The tax rate is applied according to a scale defined and per income brackets.
The present general rate is 33,33% based on the annual taxable result which is linked to annual accounts, even though a specific return is needed.
Additional rates will apply if:
For smaller companies, mostly owned by individuals, a 15% rate is applied on the first 38K€ of taxable profit. Important changes are awaited in the foreseeable future with a reduction of the taxation rate to 25% by 2022.
When companies show deficits, they are subject to corporation tax and must choose between two deferral regimes:
Corporate tax is payable in 4 quarterly instalments based on the preceding year tax. The final amount of tax is adjusted once the tax return is submitted, but no later than the second working day of May for a December year-end.
A corporate tax integration system is available for groups of firms in order to favour tax profit and loss compensations.
Capital gains on financial holdings held over 2 years are taxable based on 12% basis at the rate of 3.33% which is an effective tax rate of 4%.
VAT is applicable for goods supplied and services rendered, applicable in France and the EU, in accordance with EU directives. Exports are generally VAT exempted.
Intracom sales to the EU are exempted of French VAT when invoiced to EU VAT registered firms, bar a few exceptions.
Imports are VAT taxable when entering France or EU.
Intracom purchases from the EU are subject to French VAT when the company is registered for the VAT in France, bar a few exceptions.
The general present rate is 20% with two special reduced rates of 5.5% (e.g. food, books) and 10% (e.g. medicines, take-away, hotels).
The companies that benefit from free VAT are generally those whose turnover for the previous year is below 83K€ (selling goods) and 33K€ (services).
VAT is to be declared on a monthly, quarterly, or annual basis depending on the size of operations.
VAT is declared on an accrued basis except for services which are declared on a cash basis.
Local public administration services recover these taxes annually, based on buildings and building improvements, and on other fixed assets used by the firms.
Income tax is attached to each tax household (“foyer fiscal”), not only individuals. This includes investment and property revenues. It is computed using progressive thresholds and rates from 0 to 45% (0%, 14%, 30%, 41%, 45%).
The tax return must be filed by individuals in May of each year for the preceding year’s revenue. It must be noted that personal income tax is still collected by instalments (either by thirds or monthly), but no withholding amounts are yet directly levied from the salaries themselves, as there is no Pay as You Earn system.
Net capital gains are directly included in the individual tax revenue and will support social contributions (15,5%) and are taxed at a flat rate of 19%.
A wealth tax for individuals is payable yearly when the total net assets owned as of January 1st of each year exceed 1.300K€.
A specific return must be filed and the tax paid immediately in June of each year. This tax is computed on a progressive rate of 0,5% to 1,5% but diverse deductions and exemptions will apply (professional assets, paintings, arts) and a maximum total tax of 75% of revenues may limit this charge. Important changes are awaited regarding this tax. All assets but real estate could be excluded from the taxation basis as early as 2018.
The French administration may ask any firm to justify transfer pricing methods.
The French administration applies OECD rules and guidance for such matters. Specific thresholds apply for a fully compliant documentation (400M€ of turnover or assets within the group).
However, transfer pricing agreements should be carefully considered to avoid taxation of the local French entity on an estimated basis by the tax auditors.