French corporation tax

As a global economic power with a highly skilled workforce and excellent connections to the rest of Europe, France is an attractive place to do business. But whether you’re just starting up or thinking about expanding your current business into a new EU country, there’s one thing every business in France needs to budget for and that’s paying taxes.

French corporation tax isn’t particularly high or complicated, but it’s good to know what you’ll be dealing with if you’re considering having a business presence in France.

Taxation in France | What is the tax year in France?

In France, the tax year generally follows the calendar year, for example from January 2019 to January 2020. All pre-filled tax returns are due annually on May 31 for the previous calendar year. French corporation tax must be paid quarterly, with payment dates falling on:

• March 15
• June 15
• September 15
• December 15

If you have just started trading or earn less than €3,000 per year, you may pay French corporation tax instead.

Payments are normally made online, whether for quarters or entire fiscal years. This is usually handled by the accounting department of large companies, but if you are a small company you can find out more about paying corporation tax on the French government site.

Paying corporate tax as a resident vs non-resident company

As in many countries, the French corporation tax you will pay will depend on whether you operate a business in the country (known as a resident company) or whether your business operates from another country and you trade in France. You are considered a resident company if your company is incorporated under French commercial law or:

• operates through a branch or office in France
• has a dependent agent in France
• completes a “full commercial cycle” in France

If you are a resident company, you will have to pay French corporation tax on your French source income. This means that you will pay tax on all profits generated in France, but generally also on activities generated in other countries where you are considered a non-resident company. Indeed, as a French resident company, the money was earned while being physically based in France.

The taxable income of a non-resident company is different. If you are not a French resident company, for example because you are registered and operating from the UK, your taxable profit is only on income:

• attributable to commercial activity in France
• of real estate located in France

This means that cross-border companies that only trade in France without being based there would generally have lower taxable income than a French resident company. If you are unsure whether your business qualifies as a resident company or if you have some flexibility as to which EU country you are operating from, it is worth discussing this with your accountants. Trading as a non-resident company could save you a significant amount of French corporation tax.

If you are a non-resident company liable to pay French corporation tax, you can make additional savings with a business account abroad. By opening an account with a foreign exchange specialist like WorldFirst, you can save on foreign exchange fees with fixed and transparent fees.

2020 corporate tax rates | What are the tax rates in France?

The corporate tax rate in France depends on your annual turnover. For the tax year from January 2019 to January 2020, most companies will pay 28%, as this is the rate applicable to taxable income up to 250 million euros.

As soon as your company generates more than 250 million euros in taxable income, a different rate applies. You’ll pay 28% on the first €500,000, then 31% on any taxable income beyond that.

Non-profit organizations, like charities, have special corporate income tax rates. For the 2020 financial year, it is 24% for income from assets (e.g. real estate rentals) and 10% for income from movable assets (e.g. bonds).

If your business sells a building or other property, you will pay 19% capital gains tax. This rate is based on the company’s commitment to retain the building, title or rights for five years.

A withholding tax of 28% is due on dividends paid to a non-resident shareholder. There is, however, a tax treaty in place which means that you do not have to pay withholding tax on dividends paid to a French company by a qualifying European parent company.

Corporate tax changes in France due to coronavirus

In order to help companies affected by the coronavirus, the General Directorate of Public Finance have implemented special measures.

The Covid-19 settlement plan supports very small businesses and small and medium-sized enterprises (SMEs) that started their business activity on or before December 31, 2019. It gives affected businesses greater flexibility in when they pay corporate taxes and VAT due between March 1 and May 31, 2020.

Businesses can apply for the Covid-19 Settlement Plan to reduce or delay taxes until they are better able to pay if:

• their tax declaration is up to date
• they have less than 250 employees
• their turnover excluding taxes is less than 50 million euros

Complete the Covid 19 Settlement Plan Form to apply.

Businesses can also defer paying payroll taxes for that tax year. Currently, payments due until August 2020 may be delayed and other measures may be put in place. See the Directorate General of Public Finances FAQs for more details.

Can I choose to only pay income tax?

There seems to be some flexibility for some companies to choose whether they pay French corporation tax or income tax.

If you have a small joint-stock company, during the first five years of operation you can choose to be taxed under the personal income tax system or pay corporation tax.

Similarly, if you operate as an entrepreneur of a natural person with limited liability (you and your assets are therefore separate), you can pay the tax via your French income tax return or you can pay the tax on French companies.

If you operate as a sole proprietor, your taxable income will automatically fall under the personal income tax system, as you and your business are a single legal entity.

You must pay corporation tax if you are:

• Anonimous society
• Limited Liability Company
• Partnership Limited by shares
• Joint stock company
• Independent business
• Professional union for activities relating to the defense of the rights and interests of your members

Claim tax breaks for research and development

Companies can benefit from French tax credits on eligible research and development expenses. This grants the company 30% of the cost of expenses for the tax year within the limit of 100 million euros. For large companies that spend more than that on research and development, you can claim 5% tax credits on expenditures over €100 million.

Eligible research and development expenses include costs related to:

• Equipment (fixed assets) necessary for R&D work
• Qualified scientific or engineering personnel
• Filing of patents or defense of patents, including insurance contracts relating to the legal defense of patents
• Monitoring of technical developments

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While every effort is made to ensure the accuracy of the information published here, you should confirm the most current information with the sources described above and consider your business needs before making a decision. The information published is of a general nature only and does not take into account your personal objectives, your financial situation or your particular needs.