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French corporate income tax : large companies will not fully benefit from the reduction in the standard rate

Breaking with the downtrend in the French corporate income tax (CIT) rate enacted at the end of 2017, new legislation finally adopted on 11 July 2019 subjects companies achieving a turnover of €250 million or more to a standard CIT rate of 33 1/3 % on the portion of their taxable profit exceeding €500k.


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In brief

Breaking with the downtrend in the French corporate income tax (CIT) rate enacted at the end of 2017, new legislation finally adopted on 11 July 2019 subjects companies achieving a turnover of €250 million or more to a standard CIT rate of 33 1/3 % on the portion of their taxable profit exceeding €500k. This rate applies to financial years beginning on or after January 1, 2019 and ending on or after March 6 of the same year. For financial years opening on or after January 1, 2020, the impact of the rate decrease is also likely to be reduced.

In detail

Scheduled by the Finance Act for 2018, the cut in the French CIT rate was to take place over five years in order to achieve the objective of a standard rate of 25% for financial years beginning on or after 1 January 2022. The path thus planned has just been modified by new legislation, definitively adopted by the French Parliament on 11 July 2019. As mentioned in the explanatory memorandum to the new law, this measure responds to the need for budgetary efficiency, as it is intended to finance measures enacted last December following the “yellow jackets” protests.

The newly adopted law does not change the reduced 15 % CIT rate in favour of SMEs, which will continue to apply up to a taxable profit of €38,140 if the requisite conditions are met. In addition, the 3.3% social contribution provided for by article 235 ter ZCA of the FTC will continue to apply to CIT at standard rate in excess of €763k, for companies with a turnover of more than €7,630k (meeting certain other conditions relating to the holding of their capital).

The changes are as follows:

Fiscal years beginning on or after January 1, 2019

For financial years beginning on or after 1 January 2019, article 219, I of the FTC as amended by the finance act for 2018, provides for a standard CIT rate :

- set at 31% (CGI article 219, I para. 2)

- and reduced to 28% within the limit of a taxable profit of €500K over 12 months (CGI article 210, I- a septies c).

The newly adopted law partially amends these rules for the largest companies, defined as those with a turnover of €250 million or more. For these companies, the standard tax rate remains set at 33 1/3% for the financial years beginning on 1 January 2019 and ending on or after 6 March 2019, on the portion of their taxable profit exceeding €500k.

For the parent company of a tax consolidated group, the €250 million turnover threshold corresponds to the aggregate turnover of the companies member of the group.

Fiscal years beginning on or after January 1, 2020

For financial years beginning on or after 1 January 2020, article 219, I of the FTC, as amended by the Finance Act for 2018, provides that the standard CIT rate will be set at 28%.

The newly adopted law does not change this rule. However, in a speech delivered on 11 July 2019 to the Assemblee Nationale, the French Minister of Economy and Finance specified that, for companies reaching the €250 million turnover threshold, the CIT rate would only decrease in 2020 from 33 1/3% to 31%.

According to this speech, the largest companies would not benefit in 2020 from the 28% CIT rate currently provided for in article 219, I of the FTC. For these companies, the benefit of the reduction in the CIT rate will be postponed for at least two years. The Minister did not provide further details for 2021 or 2022, but the objective of a uniform rate of 25% by 2022, for all companies, remains officially stated.

The above can be summarized as follows:



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Par Marie-Hélène PINARD-FABRO, Avocat directeur, PwC Société d’avocats



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