Corporate Taxes In France
France is the largest nation in Europe and its central location in the middle of Europe makes it an attractive location for business. A highly skilled workforce and an established industrial base are major parts of its attraction.
Paris comes in second place behind Tokyo in terms of hosting the largest amount of corporate headquarters for multinational companies with more than 500 companies calling it home.
In France, the corporate income tax is imposed on businesses and the amount of tax is determined by the amount of net income that companies earn when they conduct business typically during one business year.
The standard we employ refers to the highest tax rate for Corporate Income. The corporate taxes in France is a substantial source of revenue for the state.
In this article, we will be going to learn more in-depth about the France corporate tax rate and the numerous business taxes in France. So, without any further ado, let’s begin with it.
Who Pays Corporate Taxes in France?
If you incorporate a business in France, you are required to pay various business taxes.
There are various French taxation regimes for corporations, according to the nature of the company you manage in France:
- Industrial, commercial, or craft/manual/trades/ companies are covered in the Benefices Industries et Commerciaux (BIC) system and pay the business taxes in France.
- Professional businesses are covered in the Benefices Non-Commerciaux (BNC) system.
- Agriculture-related businesses utilize companies that operate in the Benefices Agricole (BA) system.
The BNC and BIC systems are split into various parts. If your earnings are below a certain amount then you are taxed through the simplified French tax system for corporations.
The BIC threshold is EUR238,000 annually for companies that provide services and accommodations (EUR789,000 annually for sellers who resell). It is also the BNC threshold is EUR72600 per year.
Under these rules, it is mandatory to provide information about your income, deduct expenses, and add business taxes in France to the net profit of your company and you’ll be caring losses for six years.
Taxation of sole traders on corporate profits
If your business is a sole trader then you and your company are the same legal entity. In this way, you automatically pay taxes in your tax regime (Impots sur le Revenu) or under the rules of the micro-enterprise regime or the reel.
Corporate taxation for partnerships
If your company is SARL (a restricted company with joint ownership) it is possible to pay tax by an individual income tax scheme for the initial five years of operation if the business isn’t large or is a particular kind of family-owned business. In other cases, you are taxed through French taxes on corporations.
Corporate tax on limited corporations
If you are a classification that is EIRL (Entrepreneur with Individual Limited Liability) in which the assets and you are separated and you are taxpaying via your French income tax return, which is in the section for your business, commercial and industrial earnings (BIC) for artisans and traders, as well as Non-Commercial Benefits (BNC) for professional who are self-employed. If you do not, you may choose to pay France corporate tax.
Micro-Entrepreneurs in France
This approach, which is broken down into Micro-BIC and Micro-BNC, often applies to micro-entrepreneurs (or auto-entrepreneurs).
The guidelines are:
- For accommodation and trade activities like hotels and tourist lodging, the maximum threshold is EUR 176,200.
- For those who work in service and working in professions that are liberal the minimum threshold is EUR 72,600.
It is required to submit a tax return by the end of May/June each year. Typically, you pay in September or October. The new business is exempt from having to declare tax for the initial year, but when you file the declaration for the following year, it is mandatory to submit all the figures and accounts from the time your business was established.
The corporate tax rate in France
Tax rates for corporate tax in France have been decreasing gradually. In 2021 the standard rate was 26.5%, and companies with a profit of greater 500,000 euros paid a greater rate of 27.5%.
Beginning in 2022, businesses will have to pay standard business taxes in France, i.e. of 25%, regardless of their profit. Smaller businesses can get a lower rate, that is 15% for the first EUR 38,120 in profits.
Tax exemptions for corporate taxes in France
There are many ways to lower the tax burden of corporations in France as well as through the use of deductions. Based on the nature of your business you might be able to deduct certain start-up costs as well as research and development software costs.
Donations to charities are also tax-deductible and are deductible as are certain interest costs and certain payments made to foreign-related parties. For more details specific to your company, you get professional guidance from Odint Consulting.
Credits for corporate taxes in France
France provides various tax credits to companies that pay corporate tax in the country. These tax credits are usually used to offset the corporate tax which is paid. A qualified tax professional within your accounting department will be able to advise you on the specifics of your company’s circumstances.
In general, here are some tax credits you can avail of:
- A tax credit for research that allows specific investments into the field of research and development.
- A new tax credit for businesses that can provide some relief during the beginning phases of a business (only in specific areas).
- The CICE tax credit is a way to reduce the cost for businesses that employ employees (abroad) who earn lesser than the French standard wage.
Deadlines for France Corporate Taxes
Businesses must submit the French tax report within 3 months from the closing of accounts or before the 30th day of April. France corporate taxes are due each quarter on the 15th of March and 15 June, however, it’s also due on 15 September or 15 Dec.
Exemptions are available if you’re a newly formed company or you have paid less than EUR 3,000 during the previous year. In this scenario, you can make payments for France corporate tax rate on a per-year basis.
Make sure you discuss with your accountant the deadlines that your company is responsible for so that you do not have to submit tardy tax filings.
Fines for corporate taxes in France
When you make your corporation’s tax return after the deadline, you are penalized with interest at 0.4% per month, and penalties of at least 10%. A 0.4% interest rate and a penalty of no less than 5% are applicable for late payments.
The maximum penalties for these offenses increase in the event of bad good faith (40%) and for fraud (80%).
Book end-to-end experts consultation with Odint legal, accounting and company formation experts.
A resident-business can be subject to CIT in France based on its French-sourced income. In this respect, any earnings derived from foreign business activities or an international PE are exempt from the French tax base.
If you are looking to open a business in France, then, you must be aware of all the distinct corporate taxes in France imposed on businesses. However, it is recommended to seek assistance from an expert from Odint consultant, they will assist you in every possible manner.
Tax rates for corporate tax in France are gradually decreasing. In 2021, the average rate was 26.5%, with businesses that made greater than EUR500,000 paying a greater rate of 27.5 percent.
Unless tax treaties provide for the contrary the royalties are, generally speaking, subject to the withholding tax of 25. If the recipient lives in a non-cooperative nation and the royalty is subject to a tax of 75% on withholding.
In general, it is not a tax withholding charged on interest earned by a French firm, with the exception of the event that the recipient is located in an uncooperative state.
To be used for French fiscal purposes, changing ownership doesn’t affect the carry forward of tax losses unless the operation of the company is significantly altered.
Branch offices of foreign corporations are not considered to be residents in the context of tax treaties and are not eligible to benefit from the provisions of tax treaties.