Taxes in France, Taxation in France, Taxes system in France
Corporation tax is a tax, in principle payable annually, on all profits generated in France by companies and other legal entities. It concerns about a third of French companies. Legal entities may be liable to corporation tax:
?? either at the standard rate of 33?% for all their activities;
?? or at the following reduced rates:
• 15% for the first €38,120 of taxable profit of companies with turnover excluding VAT of less than €7,630,000 in the tax year or tax period, reduced where relevant to twelve months. The company's capital must be fully paid-up and at least 75% must be held continuously by individuals or by a company meeting the same conditions. For the parent company of a group as stipulated in Article 223 A of the French Tax Code (Code Général des Impôts, CGI), turnover is the sum of the turnover of each company in the group;
• 0% for long-term capital gains resulting from the disposal of participating interests (see p. 15 below);
• 0% or 15% for long-term capital gains resulting from the disposal of units in venture-capital investment funds and shares in venture-capital companies (see p. 15 below);
• 15% for income from granting licences to use patents, patentable inventions or certain industrial manufacturing processes and capital gains from the disposal of such elements (see p. 15 below);
• 19% for long-term capital gains resulting from the sale of securities of listed predominantly property companies (sociétés a prépondérance immobiliere, SPI) (see p. 15 below);
• 19% for net capital gains booked on:
- the contribution or transfer before 1 January 2012 of properties, certain similar rights and securities of SPIs, under certain conditions, to listed property investment companies, variable-capital SPIs or their affiliates;
- the transfer before 1 January 2010 of developed or non-developed properties and securities of SPIs to organisations responsible for low-rental housing;
- the transfer before 1 January 2011 of developed properties by organisations responsible for low-rental housing;
• 24% or 10% for the income from assets of non-profit organisations.
In addition, corporation tax payers are liable to a social contribution equal to 3.3% of the tax calculated on their taxable profits at the standard rate (33?%) and at the reduced rates, minus relief that may not exceed €763,000 per twelve-month period.
Companies with annual turnover of less than €7,630,000, at least 75% of whose fully paid-up capital is held continuously by individuals or by a company meeting the same conditions are exempt from this contribution (see p. 41 below).
Legal entities liable to corporation tax are subject to an annual flat-rate tax, determined on a progressive scale according to turnover plus financial income. The tax is being phased out over three years from 1 January 2009.
• From 1 January 2009, the amount of turnover as of which legal entities liable to corporation tax are subject to the annual flat-rate tax is raised from €400,000 to €1,500,000.
• From 1 January 2010, the threshold for liability to the tax is raised to €15,000,000.
• The tax is abolished as of 1 January 2011.
Corporation tax yielded €51.03 billion in 2007 and is expected to yield an estimated €52.01 billion in 2009.
PERSONAL INCOME TAX
Personal income tax is in principle a comprehensive tax levied on an individual's total income in a given year. Unless otherwise provided, all income, regardless of origin, is aggregated to give an overall net income to which a single tax scale is applied.
The scale has progressive income bands. However, there are many provisions in the method for calculating income tax that allow taxation to be adjusted to personal circumstance. Proportional levies are also applied to some types of income and capital gains.
Personal income tax is assessed annually on a tax household's taxable income in a given calendar year, declared the following year.
Personal income tax yielded €49.11 billion in 2007 and is expected to yield an estimated €52.80 billion in 2009.
I – TAXABLE INCOME
The following seven categories of income are liable to personal income tax:1
• business profits;
• professional profits;
• agricultural profits;
• income from real property;
• wages, salaries, pensions and annuities;
• income from capital assets;
• capital gains.
Value added Tax –VAT (TVA)
VAT (Taxe sur la valeur ajoutée-TVA) dominates among indirect taxes. The Beneficiary is the
State, but a levy of 0.7 percent, whose revenue is assigned to the special budget for agricultural
welfare benefits, is included in each of the VAT rates.
The tax must be paid, in general terms, on the supply of movable goods, the provision of
services and equivalent operations effected by taxable persons as part of the economic activity of an
industrial, commercial, creative, professional, agricultural or civic nature; on the acquisitions of
movable tangible property effected by taxable persons or non-taxable legal persons from taxable
persons established in other Member States of the European Union (with certain exceptions) and
equivalent transactions; on the importation of goods; on the operations explicitly ordained by law,
such as those carried out by cooperatives, those connected with real estate, self-supply and
purchases of certain products from persons not liable to VAT; on the operations which are outside
the scope of VAT legislation or are exempt from VAT, but for which the law provides the
possibility of opting for VAT, for example certain local authority services.
VAT is collected in connection with the supply of goods or the provision of a service (tax
chargeable on receipt of payment), transfer of ownership, importation, purchase or intra-
Community acquisition (tax chargeable on the fifteenth day of the following month or on the date of
the invoice, depending on the nature of the taxable transaction).
The basis of assessment is represented by prices or fees for goods and services, including all
applicable charges and taxes other than VAT.
The main exemptions are the following:
- exports and equivalent transactions;
- certain banking and financial operations;
- activities subject to local entertainments tax: sporting events, gaming clubs and casinos;
- certain activities carried out by non-profit organisations in which their management has no
- certain operations carried out by Government bodies or local authorities;
- certain real-estate operations;
- medical and paramedical activities;
- certain imports;
- educational activities.
With some exceptions, VAT paid on the purchase of goods or services for business use is
deductible from VAT due in respect of sales. Taxpayers can obtain a quarterly or yearly refund of
any overpaid VAT.
The three different rates are (from the First of April 2000):
- standard rate of 19.6 percent;
- reduced rate of 5.5 percent particularly for agricultural products, most foodstuffs, books and
theatre and cinema tickets;
- minimum rate of 2.1 percent particularly for medicinal products and newspapers.
There are also other rates concerning specific operations in Corsica and in DOM-TOM
(Domaines d’outre mer-Territoires d’outre mer).