TAXATION OF BUSINESSES
Direct taxation
Companies will usually be taxed on their profits through corporate income tax (‘impot sur les societes’ or ‘IS’).
Corporate income tax is an annual tax on all profits made in France by companies and other legal entities. It is characterised by the application of a flat rate to profits.
Companies operating as sole traders or as partnerships are subject to personal income tax at the level of their owner(s) if they have not opted to pay corporate income tax.
Standard rate
The standard rate of corporate income tax is 25% for all companies, for financial years commencing on or after 1 January 2022 (as a reminder: it was 28% and 26.5% for financial years commencing on or after 1 January 2020 and 1 January 2021 respectively).
Small and medium-sized businesses with sales of up to €10m will automatically benefit from a reduced rate of corporate income tax of 15% on the portion of profits not exceeding €42,500 for financial years ending on or after 31 December 2022. This scheme is reserved for companies at least 75% of whose fully paid-up capital is held, directly or indirectly, by individuals.
Companies liable for corporate income tax with pre-tax sales in excess of €7.63m are subject to a social security contribution equal to 3.3% of the corporate income tax calculated on their taxable profits less an allowance which may not exceed €763,000 per twelve-month period.
Reduced rates
Type of profit | Rate | Comments |
|---|---|---|
| Profits from intellectual property | 10 % | Reduced rate applicable to net profits from the assignment, licensing or sub-licensing of certain industrial property rights. |
| Capital gains on the sale of equity investments | 0 % | Condition: the shares sold must have been held for at least two years.
The benefit of the 0% rate is subject to the reintegration of a share of costs and expenses (in the result taxable at the normal rate of corporation tax) equal to 12% of the gross amount of capital gains. |
Taxes on consumption
Value Added Tax (VAT) is a tax on consumption that the consumer pays when purchasing a product or service. The standard rate is 20% and there are two reduced rates (10% and 5.5%) for certain products and services. A special rate of 2.1% is applied to press publications and medicines reimbursed by social security.
The overall amount of VAT payable is calculated by the taxable entity. If the difference between the VAT collected (on sales to consumers) and the VAT paid (to suppliers) is negative, the company normally offsets the excess with its next tax payments or may, under certain conditions, claim a refund.
Indirect and similar taxes are partially harmonised at EU level such as excise duties: taxes on spirits and alcohol, domestic tax on petroleum products, taxes on tobacco.
A general tax on polluting activities is also applicable to companies carrying out certain operations such as the storage and treatment of waste, the supply or use of lubricants, the emission of polluting substances into the atmosphere, etc.
VAT rates
| Type of rate | Rate | Comments |
|---|---|---|
| Standard rate | 20 % | |
| Reduced rates | 10 %
5,5% | The 10% rate applies in particular to passenger transport, catering (sales for consumption on the premises, takeaway or delivery, excluding sales of alcoholic beverages), home improvements, firewood, certain fertilisers and fertilising materials, and hotel and similar accommodation.. The 5.5% rate applies in particular to certain food products, equipment and services for the disabled, gas and electricity subscriptions, the provision of accommodation and food in retirement homes, the provision of meals in school canteens, books on any medium, ticket sales for live performances and films, energy renovation work in homes completed at least two years ago, and the installation and maintenance of charging infrastructure for electric vehicles. |
Local taxation
The Government collects local taxes on behalf of local authorities. They partially define the rates, within limits set by law.
Property tax on developed land (‘taxe foncière sur les proprietes baties’) is levied annually on developed land located in France except where there is a right to permanent exemption (public property, agricultural buildings, etc.) or temporary exemption (new or innovative companies, development incentives, etc.).
Property tax on undeveloped land (‘taxe foncière sur les proprietes non baties’) is levied annually on owners of undeveloped land of any kind located in France except where there is a right to permanent exemption (public property) or temporary exemption (incentives for agriculture, reforestation and conservation of environmental protection areas).
Both property taxes on developed and undeveloped land are due by the owner of the land on the 1st of January of the year of taxation.
The territorial economic contribution (‘contribution économique territoriale’) is comprised of a business premises contribution (‘cotisation foncière des entreprises’) and a contribution on the added value of companies (‘cotisation sur la valeur ajoutée des entreprises’), calculated on the basis of the added value generated by a company.
Tax rates for the territorial economic contribution and property tax:
| Tax | Rate | Comments |
|---|---|---|
| Territorial economic contribution: business premises contribution | Rates decided every year by competent local authorities | The business property tax is based solely on the rental value of the property subject to the property tax and which the company uses for its activity. Equipment and movable property are not subject to taxation. The tax owed may not be lower than a minimum contribution which depends on the amount of turnover (between €243 and €7,533, depending on the decision of the local authorities). |
| Territorial economic contribution: contribution on the value added of companies | Maximum rate : Application of degressive rates based on turnover when turnover is less than €50m. | A company must pay the contribution if:
In addition, all companies with turnover in excess of €152,500 must file a declaration of value added and number of employees, even if they do not ultimately have to pay the contribution on the added value of companies. |
| Property Tax on developed land | Rates decided every year by competent local authorities | Property tax on developed land applies to the following :
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Updated in June 2024