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French Government Proposes Massive Recovery Plan Including Key Corporate Tax Deductions for 2021

New Insight
25 September 2020

On September 3, French Prime Minister Jean Castex unveiled the broad outlines of the two-year 100 billion euro recovery plan.

“In proportion to the national wealth, it is the most massive recovery plan announced to date among the major European countries,” he said.

Within the government’s recovery proposal, France intends to improve the competitiveness of French companies by reducing their production taxes. An estimated 10 billion euros per year reduction on key corporate taxes is being proposed to take effect in 2021.

The years 2016-2019 saw France  consistently ranked as one of the most attractive countries for foreign investment.  (See 2019 Primexis article on foreign investment in France )

However France continued to have more, and higher, production taxes than most other competitive countries, especially in the area of industrial activity.

The most important of these production taxes are the property tax on built-up properties and the territorial economic contribution (CET), composed of the corporate property tax (CFE) and the value added tax (CVAE).

The newly announced measures to reduce these tax burdens in 2021 would include :

  • A 50% reduction in the CVAE for all companies corresponding to the elimination of the regional share of this tax.
  • A 50% reduction in property taxes for industrial companies
  • The lowering of the CET cap rate from 3% to 2%. Currently companies can cap the CET at 3% of the value added.

As proposed, all the tax measures of the economic stimulus plan will be included in the 2021 French Finance Bill. We at Primexis will keep you informed as soon as we have more detailed information on the reduction mechanisms to be implemented.

By Laure Barouh
Senior Manager,
International Business Services

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