Taxes in Europe Database v2
Articles 205 et seq. of the General Tax Code (Code général des impôts).
Only profits made by enterprises operating in France are liable to corporation tax, whatever their nationality. This means that profits made by a French company in enterprises operated in other countries than France are not liable to French corporation tax; likewise, a foreign company is liable to French corporation tax only on the profit made from enterprises which operate in France.
The corporate income tax is levied on the profits of businesses operating in France. These profits comprise the difference between the value of net assets at the end of the fiscal year and their value at the beginning of the same fiscal year, plus drawings by partners or operator, less additional partners' contributions.
In practice, company's profits are determined on the basis of its annual accounts, with adjustments in the form of specific deductions and additions to take account of fiscal rules, such as:
The limitation of interest deductions was introduced in the 2013 Budget Act. The net interest expenses deduction had been limited, for companies that generate more than €3 million net interest expenses during the accounting period, to 85%, for the profits of years 2012 and 2013. From January 1st 2014, it is limited to 75%.
Size limit for loss carry-forward is equal to €1 million + 50% of taxable profit over €1 million.
Except this limitation, companies have an unlimited period to use their loss carry-forward.
The bodies exempted from payment, subject to certain conditions, include regions, departments, municipalities, farmers' associations and cooperatives, housing associations, investment companies and societies whose aim is to make goods available to their members.
Specific tax credits, two most important being a tax credit for expenses in research and development (crédit d'impôt recherche) and a tax credit for competitiveness and employment (crédit d'impôt pour la compétitivité et l'emploi) :
The research tax credit (CIR) is equal to 30% of research spending at or below 100 million euros, and 5% thereafter;
The competitiveness and employment tax credit (CICE) is equal to 6% of previous year compensation of employees which are below 2.5 times the legal minimum wage.
In order to have a complete overview of Corporate taxation in France, please see also the "Corporate income tax - Social contribution on income" and the "Corporate income tax - Minimum annual corporation tax" tax forms in the database.
The reduced corporate tax rate is applicable where turnover does not exceed € 7.63 million, and on part of the profit that does not exceed € 38 120.
The corporate income tax has to be liquidated at the latest one month after the book keeping for the fiscal year has been given. For a firm ending its accounting period on December, 31th, the tax is due on May, the second open day after 1st. There are four preliminary payments during the fiscal year, due on March 15th, June 15th , September 15th and December 15th.
Firms, whose turnover exceed € 250 million (over € 500 million before 2013), € 1 billion or € 5 billion, have to pay at least 75%, 85% or 95% of their corporate income tax during the fiscal year (by a complement of their 4th preliminary payment), when their previsional taxable income has raised more than 33.33%, 17.65% ou 5.26% from previous fiscal year.
The corporate income tax has to be paid to the Tax General Directorate's accountant (comptable de la Direction Générale des Finances Publiques).
Territoriality of CIT :
Only profits made by enterprises operated in France are liable to corporation tax, whatever their nationality. This means that profits made by a French company in enterprises operated in countries other than France are not liable to French corporation tax.
However, Controlled foreign company-rules apply for foreign entities, directly or indirectly held by a French entity that benefit from a privileged tax regime (subject to a tax rate at least 50% lower than the French CIT). Foreign profits will be treated as a deemed distribution paid to the French entity in proportion to its share, interest, voting rights or financial rights held in the foreign entity.
These companies pay tax on profits made in France
In 2011, the carry-back of losses was reduced from three to one year and the carry-forward of losses limited to 60% over €1 million taxable profit. Starting from fiscal year 2012, the carry-forward of losses is reduced from 60% to 50% (with the same application's rules).
Companies liable to tax in France may not deduct losses made by enterprises they operate in other countries from their taxable profit.
Payments by a French company to non-resident are subject to a withholding tax, except for dividends paid by a French subsidiary to European parent company. Specific rules target transactions involving a non-cooperative jurisdiction. Under these rules most of payments – including dividends and interest – made to companies located in a non-cooperative jurisdiction are subject to a 75% withholding tax.
Measures against thin capitalization: the deduction of interest is capped at a statutory rate determined by reference to the annual average rate applied by credit institutions for variable interest rate loans. In addition, the deduction of interest paid by a French company to related parties is limited to the highest of the following amounts,