Corporate Tax 2010 - BMR Advisors

Bredin Prat
France
consolidated group with said subsidiaries. All the tax-consolidated
group’s members must be subject to French CIT and have the same
financial year; the parent company must not directly - or indirectly
through companies subject to CIT - be held at 95% or more by
another French company subject to French CIT.
ECJ has recently ruled in the “Papillon” decision dated 27
November 2008 that French subsidiaries indirectly held at 95% or
more through an EU-resident company may be included in a French
tax consolidated group. A law is expected to be passed before the
end of 2009 in order to implement this decision into French tax law
and address the subsequent issues it raises.
The group head company is liable to CIT on the group taxable
result, which is calculated by adding all members’ profits and
losses, subject to certain adjustments (such as the neutralisation of
certain intra-group transactions).
Except for small and medium-sized enterprises and subject to specific
conditions, French tax law does not expressly allow for relief of losses
incurred by non French subsidiaries. The possibility to offset losses
incurred by subsidiaries located in the EU and held at 95% or more by
a French tax consolidated company against French tax consolidated
profits, pursuant to ECJ’s “Marks & Spencer” decision dated 13
December 2005, still seems debatable in the absence of case law or
administrative guidelines on this matter.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
The CIT rate does not depend on whether or not the profits are
distributed or retained; the same rate applies in both situations.
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
Apart from social security charges, the main taxes applicable to
enterprises are:
Wage tax (“taxe sur les salaires”) is due by employers that are
not subject to VAT on at least 90% of their turnover. It is
assessed on the amount of salaries and benefits in kind paid to
employees and the applicable rate goes from 4.25% to 13.6%.
A 3% annual tax on real estate is due by any French and
foreign entity, which directly or indirectly owns real estate
assets or rights over such assets located in France. The tax is
assessed on the fair market value of such assets. Various
exemptions apply: tax is not due by entities that have real
estate assets representing less than 50% of their French
assets, by listed entities and their wholly-owned subsidiaries,
by retirement funds and non-profit organisations subject to
certain conditions.
Other national taxes apply such as apprenticeship tax and tax
on corporate cars.
4.8 Are there any local taxes not dealt with in answers to
other questions
Business tax (“taxe professionnelle”) is due by enterprises
that regularly carry on non-salaried activities and is based on
the annual rental value of tangible assets used by the
taxpayer for business purposes (the so-computed tax base is
then notably reduced by a 16% general relief). The
applicable rate differs from a local authority to another. A
minimum business tax, based on the enterprise’s added
value, applies when the turnover of the latter exceeds EUR
7,600,000. A business tax cap also based on the added value
generated by the taxpayer is granted to taxpayers who qualify
and who specifically request its application.
ICLG TO: CORPORATE TAX 2010
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A reform of this regime has recently been announced and could
enter into force as from 2010.
Real property tax on developed property/undeveloped land
(“taxe foncière”) is based on the net cadastral value of said
property/land (50%/80% of the cadastral value). The rate
differs from one local authority to another.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
Capital gains are subject to CIT at the standard rate, except for
capital gains mentioned below.
Capital gains on the following fixed assets, when held for at least
two years, are exempt, except for a 5% recapture of the net capital
gain, resulting in an effective taxation of 1.72%:
shareholdings recorded as “titres de participation” under
French GAAP; and
shares qualifying for the parent-subsidiary tax-regime or
shares that have been acquired by way of a takeover bid by
the initiator, when those shares are booked in a “titres de
participation” account or in a special sub-account named
“shares eligible to the long-term capital gains regime” of the
relevant account.
A specific tax regime applies to capital gains on shareholdings in real
estate companies (“sociétés à prépondérance immobilière”)
qualifying as long term investment “titres de participation” for tax
purposes:
a 19% rate applies to shareholdings in listed real estate
companies; and
the standard CIT rate applies to shareholdings in non-listed
real estate companies. A 19% rate may however apply when
sold to specific real estate companies (e.g. French REITs -
“Sociétés d’investissement immobilier cotées”).
A 15% rate finally applies to:
shareholdings in certain high risk mutual funds and venture
capital firms held for five years or more (however, subject to
certain conditions, the capital gain realised upon the disposal
of such shareholding could benefit, totally or partially, from
the above mentioned exemption); and
proceeds deriving from the licensing of rights to use patents,
patentable inventions and industrial manufacturing processes
and sales of such intellectual property rights, under certain
conditions.
Please note that capital gains mentioned above are also generally
subject to the 3.3% surcharge (computed as mentioned in question
4.1 above).
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
See above at question 5.1.
5.3 Is there a participation exemption
See above at question 5.1.
5.4 Is there any special relief for reinvestment
No relief for reinvestment is provided under French tax law with
respect to capital gains taxation.
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