Spontaneous application

Tax Relief for small and medium sized companies in France

Primexis Insights
7 October 2016
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On August 23, 2016, French Prime Minister Manuel Valls, announced that there would be a reduction in the corporate tax rate. Specifically, this measure addresses small and medium-sized companies (SMEs) in order to ease their tax burden.

By reducing the tax rate on corporations, France moves closer to the average European corporate taxation rate and this reduction is expected to positively impact the attractiveness of France as an area for investment. Other European countries have also reduced their tax rates in recent years, so this reaction on the part of the Government was expected by some managers of SMEs.

This new tax rate of 28% instead of 33.33% will initially only apply to SMEs with a turnover of less than €7.630.000 (fully paid-up) and at least 75% ownership by individuals.

SMEs benefiting from the lowest corporate rate of 15% will now be able to use this new intermediate tax rate of 28% once the first level of realised profits (€38.120 taxed at 15%) is reached. The new rate will apply up to a new threshold yet to be set. Above this new level, the rate of 33.33% will then be applied.

However, for the moment, this tax relief for SMEs is only at the draft stage with the present Government. If as anticipated, this new rate is approved, it will have to be voted into the Finance Law of 2017. So we could begin applying the new rate as of January 1st, 2017. To be followed…

“The aim, by 2020, is to lower the corporate tax to 28% for everyone”, the French Prime Minister said speaking through Agence France Presse.

The competitiveness of French companies could receive a big boost with this new rate by reducing the tax burden of SMEs. Just behind this measure is the possibility of extending this new rate of 28% (instead of 33.33%) beyond just SMEs and to all French companies as further incentive to attract major corporate groups and their subsidiaries to France.

Finally, with Brexit looming by 2019, this measure can be seen as a very favourable move and notice to British companies wanting to relocate outside of the UK in order to remain in the European Union market.

Primexis, an independent Consulting and Accounting Firm located in Paris, is specialized in assisting groups and subsidiaries of French and international companies for more than 30 years, can advise you on the application of this provision and the calculation of the corporate income tax.

By Nicolas Delabre
International Business Services


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