The French Finance Bill 2020-1721 of 29 December 2020, for 2021 was published in the French Official Gazette of 30 December.
The following note presents the main tax measures concerning French companies.
French Corporate Tax Rate Reduction
The threshold to apply the reduced 15% corporate tax rate for SMEs has been increased.
For fiscal years beginning on or after 1st January 2021, the threshold to apply the reduced corporate tax rate for SMEshas been extended to companies whose turnover excl. VAT is between €7.63 million and €10 million (Art. 18).
The Finance bill for 2021 further continues the reduction in corporate tax rates that began in 2019.
In 2021, the corporate tax rate will fall to 26.5% for companies with a turnover of less than €250 million, and to 27.5% for large companies (turnover ≥ €250 million).
Simplification of the registration formality for certain commercial operations
The Finance Bill for 2021 provides for the abolition of the obligation to register certain deeds.
This applies to capital increases in cash, by incorporation of profits, reserves or provisions; net capital increases in variable capital companies entered at fiscal year closing; capital reductions; capital amortisation, Economic Interest Groupings.
In addition, the prior registration requirement has been waived for certain actions of the clerks of the commercial courts and courts ruling in commercial session.
Measures in support of employee share ownership and employee savings schemes
The Finance Bill for 2021 provides for several measures in favour of employees’ shareholding:
- “Forfait social” (corporate social contribution) on Employee Savings Plan (“PEE – plan d’épargne entreprise”) for investment in company shares:
- The abolition of the forfait social on the employer’s contribution paid into a company savings plan (PEE) in addition to personal payments.
- A reduced flat rate of 10% on the unilateral employer’s contribution.
- Employer’s contribution on free shares allocations:
The exemption from the employer’s contribution on free share allocations already existing for SMEs has been extended to companies employing between 250 and less than 5,000 employees, and whose turnover does not exceed €1.5 billion or whose balance sheet does not exceed €2 billion.
The company must not have distributed dividends since its incorporation. The exemption applies to allocation of free shares authorised by a decision of an Extraordinary General Meeting as from 1st January 2021.
Tax credit in favour of SMEs for expenditure on energy-related renovation work
A tax credit has been created in favour of SMEs for expenditure on energy-related renovation work on their buildings for tertiary use.
In particular, it covers thermal insulation operations and the installation of heating, cooling or ventilation systems for premises.
The tax credit amount is 30% of eligible expenditure, up to a €25,000 limit per company over the duration of the scheme.
Tax Credit for Lessors
The Finance Bill for 2021 sets up a tax credit scheme for landlords who agree to waive rents in favour of lessees of commercial premises affected by the health crisis.
The tax credit applies to lessors who have waived their lessees’ rents due for the month of November 2020 and relating to premises located in France. It can be granted until 31st December 2021.
Free Revaluation of Assets
An optional system of free revaluation of all tangible and financial assets has been introduced, allowing companies to defer taxation of revaluation adjustments.
The capital gain on depreciable assets is spread over a period of 5 or 15 years depending on the nature of the transaction.
Spreading of the capital gain realised on the sale of a real estate asset to a leasing company
In the event of the sale of a real estate asset to a leasing company, carried out between 1st January 2021 and 30th June 2023 and preceded by a financing agreement accepted by the lessee with effect from 28th September 2020 and no later than 31st December 2022, the capital gain amount realised by the seller who immediately takes over the leased real estate asset may be spread over a maximum period of fifteen years.
Abolition of the 25% surcharge for non-membership of an approved management organisation
The Finance Bill for 2021 provides for the phasing out of the 25% profit mark-up for companies that do not belong to an approved management organisation.
The rate will be reduced to 20% for 2020, 15% for 2021, and 10% for 2022. The surcharge will be completely eliminated as of the 2023 Income Tax Year.
Overhaul of vehicle tax and toughening of the environmental penalty
Article 55 of the Finance Bill for 2021 provides for several changes relating to vehicle taxation and in particular:
– The adjustment of common rules on vehicle taxes
– The rearrangement of taxes on the use of motor vehicles, and
– The increase in the registration penalty with the finalisation of the “NEDC-WLTP”.