France: Tax System

Tax Rate For Foreign Companies

A resident company is subject to corporate income tax in France on its French-source income, while a non-resident company is subject to taxation in France only on the income attributable to French business activity or to a permanent establishment in the country, as well as on income from real estate located in France.

Branch profits are taxed at the same rate as corporate profits. Generally, branch profits are deemed to be distributed to the head office. A withholding tax is levied on French branches of non-resident, non-EU corporations at the rate of 25% (may be lower under a tax treaty) of net profits. Transfer pricing and controlled foreign company rules apply.

Capital Gains Taxation

Capital gains derived by companies are taxed at the normal corporate rate.
Capital gains derived from the disposal of patents, patentable inventions or software, as well as on income from the licensing of patents or patentable inventions, are subject to a reduced rate of 10%.

As with dividends, a participation exemption applies to capital gains arising from the sales of shares that form part of a substantial investment if the shares have been held for 24 months. The taxable basis is 12% of the gross amount of the capital gain realized (i.e. the gain is 88% exempt), resulting in an effective rate of 3.1%.

In general, non-resident entities are not taxable in France on capital gains derived from the disposal of French assets, unless these are part of a permanent establishment in the country (exceptions apply).

Main Allowable Deductions and Tax Credits

Expenses are deductible for depreciation or amortisation, reserves, rents for premises and equipment, wages, interests and royalties, repairs and maintenance costs etc. Ceilings may apply to some expenses such as contributions to an employee's savings plan or write-offs of machinery and inventory. Company registration expenses can be either deduced or depreciated over five years. Goodwill cannot be amortised.

Ordinary losses may generally be carried forward indefinitely or offset against the taxable profit of a given year up to EUR 1 million plus 50% of the amount in excess of EUR 1 million. Losses in excess (that are not offset against taxable profits) can be carried forward under the same conditions to subsequent tax years. The carryback is also allowed to the fiscal year immediately preceding that in which the losses arise and up to a maximum of EUR 1 million.

For R&D and software expenses, a business may elect to immediately deduct costs incurred in R&D or software or to amortise their cost on a straight-line basis over a maximum period of five years. The cost of acquiring software may be written off on a straight-line basis over 12 months, that of patents acquired can be amortised over a five-year period. An R&D credit is also available, at 30% of the R&D eligible expenses incurred during the year (up to EUR 100 million R&D expenses), and 5% on the part in excess of this amount.

Several taxes, including unrecoverable turnover taxes, registration duties, and the Territorial Economic Contribution, are deductible (corporate income tax is not).

For wages paid on or after 1 January 2019, the Competitiveness and Employment Tax Credit (CICE) is repealed and replaced by a permanent decrease in payroll charges paid by employers to finance the French social security system.

Other Corporate Taxes

Various local taxes are imposed by the government, like the Land tax or the Territorial Economic Contribution (CET), which comprises the Corporate Real Estate Contribution (CFE, based on the rental value of real estate) and the Contribution on Corporate Added Value (CVAE, based on turnover). Nevertheless, the Finance Bill for 2023 provides for the repeal of CVAE” over a two-year period,so that its rate was halved in 2023 before the tax disappears in 2024.

Social security contributions payable by the employer vary depending on the size and type of business and the location, and in some cases can exceed 50% of gross pay (around 45% on average). The annual social security ceiling (PASS) is set at EUR 43,992 in 2023, and the monthly ceiling at EUR 3,666.
Companies that do not meet the 90% VAT liability threshold for their annual turnover are required to pay payroll tax (taxe sur les salaries) on the salaries paid in the subsequent calendar year. For companies falling below the 90% threshold, the payroll tax applies to the portion of their VAT recovery ratio that is not covered by their turnover. The standard payroll tax rate is 4.25%, but for gross individual wages exceeding specific thresholds, higher rates apply (8.5% for wages ranging from EUR 8,020 to EUR 16,013 and 13.6% for wages exceeding EUR 16,013).

The sale of real property is subject to a transfer tax up to a maximum rate of 5.8%.
The transfer of shares of an SA, SAS, or SCA is subject to registration duty at a rate of 0.1% with no cap (increased to 5% if the company whose shares are transferred is a real estate company). For the sale of shares of a SARL or SNC, the transfer tax is equal to 3% of the sales price, minus a sum equal to the number of units sold x EUR 23,000/total number of the company units.

A financial transaction tax of 0.3% applies to transactions involving shares of publicly traded companies established in France whose capital exceeds EUR 1 billion.

A 3% digital services tax (DST) is levied on companies whose revenues derived from the provision of online placement of advertising, sale of collected user data and intermediation services exceeds EUR 750 million globally and EUR 25 million in France during the calendar year. For related companies, these thresholds are assessed at the group level.

Other taxes include: apprenticeship tax, company car tax, stamp duties, etc.

Other Domestic Resources

French Fiscal Administration web portal

Country Comparison For Corporate Taxation

Source: The World Bank - Doing Business, Latest data available.

Accounting System

Accounting Standards

The French accounting system is based on French GAAP. As a member of the EU, French law is in accordance with European Commission (EC) Regulation No. 1606/2002, which requires the application of IFRS in the preparation of consolidated financial statements of listed companies.

Accounting Regulation Bodies

ANC, French Accounting Norms Authority

Accounting Law

The main source of accounting regulations in France is the accountancy law (Act 83-353 of 30 April 1983), which was integrated into the Code of Commerce (articles 8 to 17, become articles L 123-12 to L123-28 in the new Code of Commerce) and followed up by the decree 2002-312 of 26 February 2002 relative to the simplification of accounting obligations for small companies. The accountancy law has incorporated the recommendations of the 4th Community Directive at the national level.

The second major source of French accountancy law is the Act 85-11 of 3/01/1985, which incorporates into national law the provisions of the 7th Community Directive for groups of companies (directive 83/349/EEC of the Council concerning consolidated accounts).

Difference Between National and International Standards (IAS/IFRS)

IFRS Standards are required for all domestic public companies and listings by foreign companies (except in the case of a foreign company whose home jurisdiction’s standards are deemed by the EU to be equivalent to the IFRS Standards. IFRSs are not required for SMEs.

Accounting Practices

Tax Year

Calendar year unless the taxpayer opts for a different end date or a different tax period.

Accounting Reports

All SAs must publish annual financial data and deposit two copies of the approved balance sheet and profit and loss (P&L) statement with the local commercial court within seven months of the end of the financial year and within one month of approval of the accounts.

A listed SA must publish its annual balance sheet, P&L statement, quarterly sales figures for each branch of activity and a semi-annual provisional balance sheet. Subsidiaries of these companies with a balance sheet of EUR 3 million or more, or portfolios of EUR 300,000 or more, are individually subject to these disclosure requirements.

The statement of source and application of funds is compulsory for large companies.

Publication Requirements

There are three levels of reporting: the basic system (normal), an abridged system (for small companies) and a developed system. They depend on the legal form and size of the companies (defined in relation to the total of the balance sheet, the turnover and the number of employees).

The reporting is annual, except for listed companies for whom reporting is quarterly.

Accountancy Profession

Accountants

The comptable (accountant) is responsible for the legal obligations of the company in regards to accounting.

The expert-comptable (chartered accountant) certifies company accounts.

The commissaire aux comptes (auditor) certifies the accounts carried out by the chartered accountant (for companies with more than 50 employees, joint-stock companies and public limited companies).

Professional Accountancy Bodies

OEC, The Higher Council of the Order of Chartered Accountants
CNCC, The National Company of Auditors
IFAC, International Federation of Accountants

Member of the International Federation of Accountants (IFAC)

CNCC and OEC member.

Member of Other Federation of Accountants

Accountancy Europe

Audit Bodies

Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organisation. You can contact an external auditor: KPMG, Ernest & Young, PricewaterhouseCoopers.

Allowable Deductions and Tax Credits

Deductibles include income-generating expenses, mandatory social security contributions, child care costs, consumer credit, investment and legal costs, losses from the rental of real property and more.

Concerning personal allowances, total taxable income is divided into the number of shares ("parts") that reflect the taxpayer's marital status and the number of dependents. Children under 18 years of age and disabled children of all ages can be claimed as dependents. Children from the ages of 18 to 21, as well as children from the ages of 21 to 25 who are full-time students, can, upon request, be claimed as dependants. The tax benefit per additional half-share for dependent children is limited to a maximum of EUR 1,678 for each of the first two children and EUR 3,356 for each additional child.

Payments of alimony to an ex-spouse, and of child support to children under 18 are fully deductible expenses when made according to the provisions of a court settlement. Support payments made to parents, grandparents, children over 18, or married children qualify as a deductible expense (with a cap for children), provided that the beneficiaries are in need and that such can be demonstrated.
Taxpayers carrying out an employed or self-employed activity are entitled to a tax credit of up to 50% of childcare expenses incurred for each dependent child under seven placed at nursery school or with non-domestic help (capped at EUR 3,500 per child/per annum).

Charitable contributions to qualified organizations can be claimed as a tax reduction of up to 66% of actual contributions. A tax reduction for schooling expenses is granted to taxpayers whose dependent children study in secondary schools, as follows: EUR 61 for "collège", EUR 153 for "Lycée", and EUR 183 for university. The reduction deriving from tax deductions/credits is globally limited to EUR 10,000/year.

Special Expatriate Tax Regime

Individuals with their tax domicile in France are generally taxed on their worldwide income, whereas non-residents are subject to tax only on their income arising in France.

For non-residents, a 20% minimum rate of tax applies to income from French sources up to EUR 27,478 and 30% for any income exceeding this amount (14.4% and 20%, respectively, for income earned in France's overseas departments). A "PAYE income tax system" has been introduced, meaning tax is now deducted at source from the employee’s wage.
France has generous expatriate tax regimes to attract foreign investment, especially around health insurance, complimentary retirement pension contributions and other exemptions.
For further information, visit the dedicated page on the website of the French Tax Authority.

Capital Tax Rate

Capital gains from the sale of immovable property are taxed in different ways according to the specifically applicable regime (in any case, gains derived from the sale of a principal residence are tax-free). Gains from the sales of a business are taxed as business income. Gains from the sales of securities are taxed at 30% (12.8% for income tax, plus social levies at a rate of 17.2%), and, in some cases, to an exceptional income tax for high earners at a maximum marginal tax rate of 4%. Taxpayers with low income may opt to tax the capital gains subject to the flat tax rate at the progressive income tax rates.

A Property Wealth tax (IFI - link in French only) of between 0.5% (after an allowance of EUR 800,000) to 1.5% (for net wealth in excess of EUR 10 million) applies to individuals with real estate net asset value above EUR 1.3 million, with various exemptions. Tax residents of a given year are liable to tax on their worldwide real estate properties, non-residents only on properties located in France.

The sale of real property is subject to a transfer tax at a maximum rate of 5.8%.

Inheritance and gift tax between 5% and 45% (after a rebate of EUR 100,000 when beneficiaries are direct dependents) is levied on the beneficiaries of a property transfer.
Owners are liable for a tax based on the rental value of the property, whereas occupants are liable for a dwelling tax base on the rental value of the property (rates vary). As of 1 January 2023, the dwelling tax on an individual’s main residence is abolished.
Individuals who had their tax domicile in France for six out of the previous ten years and who decide to transfer their tax domicile outside of the country are taxed on the unrealised capital gains on shares and rights held directly by tax household members when these rights represent a total value exceeding EUR 800,000 or exceed 50% of the shareholding. These capital gains or value of receivables will be subject to personal income taxation at a flat tax rate of 12.8% and social surtaxes of 17.2%.

The employee’s share of French social contributions is generally around 20-23% of the salary. The annual social security ceiling (PASS) is set at EUR 43,992 in 2023, and the monthly ceiling is at EUR 3,666.