Corporation income tax
It applies on profits realised by companies (SA, SAS, SCA and SARL) operating in France and on earnings taxable in France.
Limited partnerships (SCS) are subject to CIT on the portion of profits attributable to the limited partners.
Société Civile (SC) are subject to CIT if they are engaged in commercial activities or if they elect to do so.
Branches of foreign companies based in France are subject to CIT. Their profits net of CIT are deemed distributed to non-resident shareholders of the foreign company and automatically subject to a temporary withholding tax (WHT) of 30% (it can be reduced or cancelled pursuant to the provisions of a double tax treaty provisions).
The ordinary rate of CIT is currently 28% (it should be reduced to 25% by 2022) applicable under €500,000 of profit and 31% above. For companies with a turnover exceeding € 250m, the tax rate for profit exceeding € 500,000 is 33.33%. A reduced rate of 15% applies to SMEs up to €38,120 of profit.
Tax credits may apply such as research tax credits, employment tax credits, free zone tax credits.
Deduction may be applied for general operating expenses, depreciation, amortisation and various tax-deductible expenses incurred in the normal business of the company or for its benefit.
The tax deductibility of interest is limited to the higher of the two following amounts: €3m or 30% of the tax EBITDA.
It applies to all transfer of fixed assets of companies subject to CIT.
Short-term capital gain (relates to all assets held for less than 2 years) are taxable as ordinary profit. Short-term capital losses are deductible from the tax base.
Long-term capital gains usually involves shares or patents.The transfer of shares considered as participation shares which have been held for more than 2 years are taxable on a 12% basis at the ordinary tax rate. Long-term capital losses can not be used to offset short-term capital gain nor the ordinary tax result of the company. The transfer of patents, copyrighted software, and manufacturing process related to patents or software and income resulting from the licensing of these assets are taxable upon detention, at a 10% rate after application of a nexus ratio, aiming at reserving such favourable regime to companies which incur R&D expenses. This favourable tax regime does not apply when the seller and the buyer are related entities.
Dividends received by a company in France from subsidiaries either located in France or abroad are taxable on a 5% basis at the common tax rate, provided that (i) the company hold at least 5% of the share capital of the company distributing (ii) is subject to standard CIT and (iii) held the shares for a period of at least 2 years or commits to do so.
Losses can be offset against any profits made in the next financial year (limited above €1m of profits, to 50% of any profits exceeding this threshold). Losses that cannot be used can be carried forward indefinitely.
They can also be carried back to previous financial year within the limit of €1M.
Companies are liable to registration duties on incorporation, during their lifetime and on dissolution for certain events and when shareholders sell their shares.
VAT is charged on a supply of goods or services made in France and on goods and certain services imported into France. The current rate of VAT is 20% with reduced rates of 10%, 5.5% and 2.1% for certain supplies.