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flag France France: Tax System

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

 

Corporate Taxes

Tax Base For Resident and Foreign Companies
Generally, a resident company is a company that is incorporated under French commercial laws or that has a permanent establishment in the country. According to French jurisprudence, a company is deemed to have a permanent establishment if: the business activity is conducted through an establishment (branch, office, etc.); the company has a dependent agent in the country; or a complete commercial cycle is carried out in France.
 

Tax Rate

Corporate tax rate (2022) 25% flat rate (from 2022, for 2021 the rate was 27.5%)
Small corporations realising a turnover of up to EUR 10 million 15% on their first EUR 38,120 of taxable profits
Surcharge 3.3% of the taxable income; applied to large-size companies that pay over EUR 763,000 in corporate tax (bringing the marginal effective rate to 25.83%
 
Tax Rate For Foreign Companies
A resident company is subject to corporate income tax in France on its French-source income, while a non-resident company is subject to taxation in France only on the income attributable to French business activity or to a permanent establishment in the country, as well as on income from real estate located in France.

Branch profits are taxed at the same rate as corporate profits. Generally, branch profits are deemed to be distributed to the head office. A withholding tax is levied on French branches of non-resident, non-EU corporations at the rate of 25% (from 2022 - may be lower under a tax treaty) of net profits. Transfer pricing and controlled foreign company rules apply.

Capital Gains Taxation
Capital gains derived by companies are taxed at the normal corporate rate.
Capital gains derived from the disposal of patents, patentable inventions or software, as well as on income from the licensing of patents or patentable inventions, are subject to a reduced rate of 10%.

As with dividends, a participation exemption applies to capital gains arising from the sales of shares that form part of a substantial investment if the shares have been held for 24 months. The taxable basis is 12% of the gross amount of the capital gain realized (i.e. the gain is 88% exempt), resulting in an effective rate of 3.1%.

In general, non-resident entities are not taxable in France on capital gains derived from the disposal of French assets, unless these are part of a permanent establishment in the country (exceptions apply).

Main Allowable Deductions and Tax Credits
Expenses are deductible for depreciation or amortisation, reserves, rents for premises and equipment, wages, interests and royalties, repairs and maintenance costs etc. Ceilings may apply to some expenses such as contributions to an employee's savings plan or write-offs of machinery and inventory. Company registration expenses can be either deduced or depreciated over five years. Goodwill cannot be amortised.

Ordinary losses may generally be carried forward indefinitely or offset against the taxable profit of a given year up to EUR 1 million plus 50% of the amount in excess of EUR 1 million. Losses in excess (that are not offset against taxable profits) can be carried forward under the same conditions to subsequent tax years. The carryback is also allowed to the fiscal year immediately preceding that in which the losses arise and up to a maximum of EUR 1 million.

For R&D and software expenses, a business may elect to immediately deduct costs incurred in R&D or software or to amortise their cost on a straight-line basis over a maximum period of five years. The cost of acquiring software may be written off on a straight-line basis over 12 months. The cost of patents acquired can be amortised over a five-year period. An R&D credit is also available, at 30% of the R&D eligible expenses incurred during the year (up to EUR 100 million R&D expenses), and 5% on the part in excess of this amount.

Several taxes, including unrecoverable turnover taxes, registration duties, and Territorial Economic Contribution, are deductible (corporate income tax is not).

For wages paid on or after 1 January 2019, the Competitiveness and Employment Tax Credit (CICE) is repealed and replaced by a permanent decrease in payroll charges paid by employers to finance the French social security system.

Other Corporate Taxes
Various local taxes are imposed by the government, like the Land tax or Territorial Economic Contribution (CET), which comprises of the Corporate Real Estate Contribution (CFE, based on the rental value of a real estate) and the Contribution on Corporate Added Value (CVAE, based on turnover).

Social security contributions payable by the employer vary depending on the size and type of business and the location, and in some cases can exceed 50% of gross pay (around 45% on average).
The sale of real property is subject to a transfer tax up to a maximum rate of 5.8%.
The transfer of shares of an SA, SAS, or SCA is subject to registration duty at a rate of 0.1% with no cap (increased to 5% if the company whose shares are transferred is a real estate company). For the sale of shares of a SARL or SNC the transfer tax is equal to 3% of the sales price, minus a sum equal to the number of units sold x EUR 23,000/total number of the company units.

A financial transaction tax of 0.3% applies to transactions involving shares of publicly traded companies established in France whose capital exceeds EUR 1 billion.

A 3% digital services tax (DST) is levied on companies whose revenues derived from the provision of online placement of advertising, sale of collected user data and intermediation services exceeds EUR 750 million globally and EUR 25 million in France during the calendar year. For related companies, these thresholds are assessed at the group level.

Other taxes include: apprenticeship tax, company car tax, stamp duties, etc.

Other Domestic Resources
French Fiscal Administration web portal
Consult the Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Country Comparison For Corporate Taxation

  France OECD United States Germany
Number of Payments of Taxes per Year 9.0 10.1 10.6 9.0
Time Taken For Administrative Formalities (Hours) 139.0 163.6 175.0 218.0
Total Share of Taxes (% of Profit) 60.7 41.6 36.6 48.8

Source: Doing Business - Latest available data.

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Accounting Rules

 

Accounting System

Accounting Standards
The French accounting system is based on French GAAP. As a member of the EU, French law is in accordance with European Commission (EC) Regulation No. 1606/2002, which requires the application of IFRS in the preparation of consolidated financial statements of listed companies.
Accounting Regulation Bodies
ANC, French Accounting Norms Authority
Accounting Law
The main source of accounting regulations in France is the accountancy law (Act 83-353 of 30 April 1983), which was integrated into the Code of Commerce (articles 8 to 17, become articles L 123-12 to L123-28 in the new Code of Commerce) and followed up by the decree 2002-312 of 26 February 2002 relative to the simplification of accounting obligations for small companies. The accountancy law has incorporated the recommendations of the 4th Community Directive at the national level.

The second major source of French accountancy law is the Act 85-11 of 3/01/1985, which incorporates into national law the provisions of the 7th Community Directive for groups of companies (directive 83/349/EEC of the Council concerning consolidated accounts).
Difference Between National and International Standards (IAS/IFRS)
IFRS Standards are required for all domestic public companies and listings by foreign companies (except in the case of a foreign company whose home jurisdiction’s standards are deemed by the EU to be equivalent to the IFRS Standards. IFRSs are not required for SMEs.
 

Accounting Practices

Tax Year
Calendar year unless the taxpayer opts for a different end date or a different tax period.
Accounting Reports
All SAs must publish annual financial data and deposit two copies of the approved balance sheet and profit and loss (P&L) statement with the local commercial court within seven months of the end of the financial year and within one month of approval of the accounts.

A listed SA must publish its annual balance sheet, P&L statement, quarterly sales figures for each branch of activity and a semi-annual provisional balance sheet. Subsidiaries of these companies with a balance sheet of EUR 3 million or more, or portfolios of EUR 300,000 or more, are individually subject to these disclosure requirements.

The statement of source and application of funds is compulsory for large companies.
Publication Requirements
There are three levels of reporting: the basic system (normal), an abridged system (for small companies) and a developed system. They depend on the legal form and size of the companies (defined in relation to the total of the balance sheet, the turnover and the number of employees).

The reporting is annual, except for listed companies for whom reporting is quarterly.
 

Accountancy Profession

Accountants
The comptable (accountant) is responsible for the legal obligations of the company in regards to accounting.

The expert-comptable (chartered accountant) certifies company accounts.

The commissaire aux comptes (auditor) certifies the accounts carried out by the chartered accountant (for companies with more than 50 employees, joint-stock companies and public limited companies).
Professional Accountancy Bodies
OEC, The Higher Council of the Order of Chartered Accountants
CNCC, The National Company of Auditors
IFAC, International Federation of Accountants
Member of the International Federation of Accountants (IFAC)
CNCC and OEC member.
Member of Other Federation of Accountants
Accountancy Europe
Audit Bodies
Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organisation. You can contact an external auditor: KPMG, Ernest & Young, PricewaterhouseCoopers.
 
 

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Consumption Taxes

Nature of the Tax
Value-added Tax (VAT) (Taxe sur la Valeur Ajoutée or TVA)
Standard Rate
20%
Reduced Tax Rate
The reduced rate of 10% (art. 278 bis, 278 quater, 278 sexies A, 278 septies and art. 279 of the CGI) is applicable in particular to unprocessed agricultural products, firewood, housing improvement works which do not benefit from the 5.5% rate, certain accommodation and camping services, fairs and exhibitions, fairground games and rides, entrance fees to museums, zoos, monuments, passenger transport, processing of waste, restoration.
The reduced rate of 5.5% (art. 278-0 bis, 278-0 bis A, art. 278 sexies of the CGI) concerns most food products, feminine hygiene protection products, equipment and services for the disabled, books on any medium, gas and electricity subscriptions, supply of heat from renewable energies, supply of meals in school canteens, ticketing for live shows and cinemas, certain imports and deliveries of works of art, improvement works the energy quality of housing, social or emergency housing, home ownership.
The special rate of 2.1% (art. 281 quater et seq. of the CGI) is reserved for medicines reimbursable by social security, sales of live animals for slaughter and charcuterie to non-taxable persons, the television license fee, certain shows and press publications registered with the Joint Commission for Publications and Press Agencies.
The special rates applicable in Corsica are fixed in article 297 of the CGI.
The special rates applicable to the overseas departments are fixed in articles 294 of the CGI.
Exclusion From Taxation
Land (under specific conditions); financial transactions; buildings completed for more than five years; insurance; education; health and welfare; and betting and gaming are VAT-exempt.

Exports of goods outside the EU and related services; specified financial transactions and intra-Community supplies of goods are zero-rated.

Method of Calculation, Declaration and Settlement
VAT applies to the sales price of the supply of goods and services produced in France and on general imports. Under the franchise regime, the following thresholds apply to small French-established businesses:
• sales of goods: EUR 85,800 during the previous year (or EUR 94,300 when the turnover did not exceed the EUR 85,800 threshold during the year before the previous year)
• supplies of services: EUR 34,400 during the previous year (or EUR 36,500 when the turnover did not exceed the EUR 34,400 threshold during the year before the previous year).
Filing can be monthly, quarterly or annually, depending on the type of activities and several other factors.
Other Consumption Taxes
Excise duties are applied to alcohol and alcoholic drinks, processed tobaccos and oil and gas products.

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Individual Taxes

Tax Base For Residents and Non-Residents
Under French law, an individual is deemed to be domiciled in France when at least one of the following conditions is met: the habitual abode of the person or family is in France or France is the principal place of sojourn; professional activities are carried out in the country; the centre of economic interests is in France.

Certain executives of companies that have their registered office in France and that have French revenues in excess of EUR 250 million are deemed to exercise their professional occupations in France and, therefore, to have their tax residence in the country.

 

Tax Rate

Personal income tax (IRPP) Progressive rate up to 45%
Up to EUR 10,225 0%
Between EUR 10,226 and EUR 26,070 11%
Between EUR 26,071 and EUR 74,545 30%
Between EUR 74,546 and EUR 160,336 41%
Above EUR 160,336 45%
Exceptional contribution (above EUR 250,000 for single individuals and EUR 500,000 for married couples) - 3% on income between EUR 250,000 and EUR 500,000 for single individuals (EUR 500,000 and EUR 1 million for married couples);

- 4% on the part of income exceeding EUR 500,000 for single individuals (EUR 1 million for married couples)

Special social security surcharges for French residents Up to 17.2%
 
Allowable Deductions and Tax Credits
Deductibles include income-generating expenses, mandatory social security contributions, child care costs, consumer credit, investment and legal costs, losses from the rental of real property and more.

Concerning personal allowances, total taxable income is divided into the number of shares ("parts") that reflects the taxpayer's marital status and the number of dependants. Children under 18 years of age and disabled children of all ages can be claimed as dependents. Children from the ages of 18 to 21, as well as children from the ages of 21 to 25 who are full-time students, can, upon request, be claimed as dependants. The tax benefit per additional half-share for dependent children is limited to a maximum of EUR 1,592 for each of the first two children and EUR 3,184 for each additional child.

Payments of alimony to an ex-spouse, and of child support to children under 18 are fully deductible expenses when made according to the provisions of a court settlement. Support payments made to parents, grandparents, children over 18, or married children qualify as a deductible expense (with a cap for children), provided that the beneficiaries are in need and that such can be demonstrated.
Taxpayers carrying out an employed or self-employed activity are entitled to a tax credit of up to 50% of childcare expenses incurred for each dependent child under seven placed at nursery school or with non-domestic help (capped at EUR 2,300 per child/per annum).

Charitable contributions to qualified organizations can be claimed as a tax reduction of up to 66% of actual contributions. A tax reduction for schooling expenses is granted to taxpayers whose dependent children study in secondary schools, as follows: EUR 61 for "collège", EUR 153 for "Lycée", and EUR 183 for university. The reduction deriving from tax deductions/credits is globally limited to EUR 10,000/year.

Special Expatriate Tax Regime
Individuals with their tax domicile in France are generally taxed on their worldwide income, whereas non-residents are subject to tax only on their income arising in France.

For non-residents, a 20% minimum rate of tax applies to income from French sources up to EUR 26,070 and 30% for any income exceeding this amount (14.4% and 20%, respectively, for income earned in France's overseas departments). A "PAYE income tax system" has been introduced, meaning tax is now deducted at source from the employee’s wage.
France has generous expatriate tax regimes to attract foreign investment, especially around health insurance, complimentary retirement pension contributions and other exemptions.
For further information, visit the dedicated page on the website of the French Tax Authority.

Capital Tax Rate
Capital gains from the sale of immovable property are taxed in different ways according to the specifically applicable regime (in any case, gains derived from the sale of a principal residence are tax-free). Gains from the sales of a business are taxed as business income. Gains from the sales of securities are taxed at 30% (12.8% for income tax, plus social levies at a rate of 17.2%), and, in some cases, to an exceptional income tax for high earners at a maximum marginal tax rate of 4%. Taxpayers with low income may opt to tax the capital gains subject to the flat tax rate at the progressive income tax rates.

A Property Wealth tax (IFI - link in French only) of between 0.5% (after an allowance of EUR 800,000) to 1.5% (for net wealth in excess of EUR 10 million) applies to individuals with real estate net asset value above EUR 1.3 million, with various exemptions. Tax residents of a given year are liable to tax on their worldwide real estate properties, non-residents only on properties located in France.

The sale of real property is subject to a transfer tax at a maximum rate of 5.8%.

Inheritance and gift tax between 5% and 45% (after a rebate of EUR 100,000 when beneficiaries are direct dependents) is levied on the beneficiaries of a property transfer.
Owners are liable for a tax based on the rental value of the property, whereas occupants are liable for a dwelling tax base on the rental value of the property (rates vary).
Individuals who had their tax domicile in France for six out of the previous ten years and who decide to transfer their tax domicile outside of the country are taxed on the unrealised capital gains on shares and rights held directly by tax household members when these rights represent a total value exceeding EUR 800,000 or exceed 50% of the shareholding. These capital gains or value of receivables will be subject to personal income taxation at a flat tax rate of 12.8% and social surtaxes of 17.2%.

The employee’s share of French social contributions is generally around 20-23% of the salary.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Tax Treaties of France
Withholding Taxes
Dividends paid by a French corporation to a non-resident shareholder are subject to a 25% withholding tax calculated on the gross dividends. Dividends paid by a French company to a European parent company are exempt from tax under the EU Directive on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States.

In general, interest payments are not subject to withholding tax.

Royalties paid to a non-resident company or individual are subject to the standard corporate income tax rate (25% from 2022). Royalties paid to a European company may be exempt from tax under the European common system of taxation applicable to cross-border interest and royalty payments. Royalties paid to residents are generally exempt.

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Latest update: November 2022

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