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France
Overview

France is a founding member of the European Union (EU) and a member

of the G7, G20, Organisation for Economic Co-operation and Development
(OECD), and World Trade Organization (WTO). It is divided into 12
metropolitan regions, with Paris as the capital. The official language of
France is French, and the currency is the euro (EUR).

The French government still maintains a strong presence in some sectors,

particularly power, public transport, and aerospace and defence
industries. With at least 89 million foreign tourists per year, France is the
most visited country in the world.

Taxable period

The French tax year runs from 1 January to 31 December.

Quick rates and dates

Corporate income tax (CIT) rates

28%, plus a social contribution of 3.3% assessed

on the amount of CIT. For corporations having
Headline CIT rate (%)
revenue in excess of EUR 250 million, 31% rate
applicable to tax result in excess of EUR 500,000.

Corporate income tax (CIT) due dates

Regarding FYs which end on 31 December, by

CIT return due date
end of April of the following year.

Regarding FYs which end on 31 December, on 15

CIT final payment due date
April of the following year.

CIT estimated payment due dates By way of four instalments (i.e. which have to be
filed and paid on 15 March, 15 June, 15

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Corporate income tax (CIT) rates

September, and 15 December for FYs which end

on 31 December).

Personal income tax (PIT) rates

Headline PIT rate (%) 45, plus surtax and social surcharges

Personal income tax (PIT) due dates

PIT return due date Mid-May

PIT final payment due date 15 September

Two instalments (15 February and 15 May) or

PIT estimated payment due dates monthly instalments (15th day of each month
from January to October inclusive).

Value-added tax (VAT) rates

Standard VAT rate (%) Turnover tax: 20

Withholding tax (WHT) rates

Resident: NA;
WHT rates (%)
(Dividends/Interest/Royalties)
Non-resident: 30 / 0 / 33.33

Capital gains tax (CGT) rates

Headline corporate capital gains

tax rate (%) Capital gains are subject to the normal CIT rate.

Headline individual capital gains 30, plus exceptional income tax for high
tax rate (%) earners at 4%

Net wealth/worth tax rates

Headline net wealth/worth tax

rate (%) 1.5

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Inheritance and gift tax rates

Headline inheritance tax rate (%) 60

Headline gift tax rate (%) 60

Taxable period

The ordinary taxable period is equal to 12 months. Conformity with the

calendar year is not requested. In particular cases, the duration of the
taxable period can be different from 12 months (e.g. newly established
companies are allowed to have taxable periods longer than 12 months;
companies that are involved in extraordinary transactions [merger, de-
mergers, etc.], as well as companies that are liquidated, may have
taxable periods shorter than 12 months).

Tax returns

Regarding fiscal years that end on 31 December, CIT returns are, in

theory, due by the end of April of the following year.

Accounting records to be provided in 'computerised format' in case of tax

audit

Companies are required to keep their accounting records in computerised

form and to provide them to the tax authorities in the same format. Such
electronic files must be provided for fiscal year 2015 and following years.

Payment of tax

Payment of tax is made during the fiscal year by way of four instalments
equal to 1/4 of the standard taxable income of the preceding year (i.e. by
15 March, 15 June, 15 September, and 15 December for fiscal years that
end on 31 December). Regarding fiscal years that end on 31 December,
final CIT payment is due on 15 April of the following year.

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Currently, for companies that have gross income in excess of EUR 250
million, the last down-payment is assessed on the basis of the estimated
taxable income of the present year. This instalment plus the three
previous ones should represent 95% or 98% of the CIT due on profits of
the current year (95% for taxpayers with a revenue between EUR 250
million and EUR 1 billion and 98% for those with revenue in excess of EUR
1 billion). This leads to an anticipated payment of CIT.

Interest and penalties

Regarding CIT, VAT, registration duties, and business tax:

 late payment is subject to late interest computed at a rate of 0.4% per

month late (4.80% per year) (the 2017 Act reduces this rate to 0.20% per
month late [2.40% per year] for interest due from 1 January 2018 through
31 December 2020) and to a 5% penalty, and
 late filing is subject to late interest computed at a rate of 0.4% per month
late (4.80% per year) (the 2017 Act reduces this rate to 0.20% per month
late [2.40% per year] for interest due from 1 January 2018 through 31
December 2020) and to a 10% penalty.

Moreover, a penalty of 40% applies in case of bad faith and is increased to

80% in case of fraud.

Tax audit process

The French tax authorities are responsible for verifying that taxpayers’
obligations are correctly complied with and, if necessary, for making
adjustments by issuing tax assessments.

Once an assessment is notified by the tax inspector and if the taxpayer

disagrees with such an assessment, the taxpayer has 30 days to answer
(with a possible 30 days extension upon request) and to provide
comments to the French tax authorities.

Following an exchange of written correspondences between the tax

inspector and the taxpayer (including hierarchical recourse), either party
may submit any disagreement on a factual issue to the departmental or

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national tax commission. The decision of this commission is neither

binding on the taxpayer nor on the French tax authorities.

In cases where the disagreement between the French tax authorities and
the taxpayer still remains, the taxpayer can file a claim with the French
civil courts or with the French administrative courts, depending on the
type of tax that has been subject to assessment by the tax inspector.

France has reinforced its criminal rules applicable to tax matters. French
tax authorities is now obliged to transfer to the prosecutor any tax
reassessment exceeding the amount of EUR 100,000, provided that said
reassessment notably gives rise to the application of a 100%, 80% tax
penalty or 40% bad faith penalty in cases where a 40% or 80% tax
penalty or a tax fraud proceeding already occurred in the past six years.

Regularisation processes in some circumstances are facilitated with

application of lower penalties.

Subject to some conditions, there is the possibility for companies to enter

into enhanced relationships with French Tax Administration in order to
facilitate communication and ruling requests.

General anti-abuse rule (GAAR)

Exclusive tax purpose

To restore their true character, the French tax authorities is entitled to

disregard, as not being enforceable against it, acts that constitute an
abuse of law (i) either because these acts are fictitious, or (ii) because, by
seeking to benefit from a literal application of the laws or decisions
against the objectives sought by their authors, these acts could not have
been inspired by any other purpose than avoiding or mitigating the tax
burden that the party concerned would normally have borne, given its
actual situation or activities, had these acts not been executed or
committed.

On top of the avoided taxes and the standard late payment interest, a 80
% penalty for abuse of law is applicable. Specific procedural rules apply in
case French Tax Authorities apply the abuse of tax law procedure.

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Principal tax purpose

A wider GAAR provision was also enacted. The French tax authorities may
disregard an arrangement or series of arrangements put into place for the
main purpose or one of the main purposes of obtaining a tax advantage
that defeats the object or purpose of French tax law and which is not
genuine (which means that it does not rely on an economic rationale).

French tax authorities may apply penalties depending on the

circumstances.

Statute of limitation

Regarding CIT, the general statute of limitation expires at the end of the
third year following the one that has triggered the tax liability.

Under certain circumstances, the statute of limitation can be extended up

to ten years (e.g. fraud, undisclosed/hidden activity); the statute of
limitation can also be interrupted (e.g. notification of a notice of
reassessment or international tax assistance).

Topics of focus for tax authorities

Transfer pricing, business reorganisation, financing arrangements, and

VAT are standard elements reviewed during tax audit.

The ruling system

To secure the tax status of a situation, foreign companies and individuals

can request a private ruling from the French tax authorities as to whether
their activities constitute a PE or fixed base.

The French tax authorities have to provide an answer within three months
after the receipt of the request. In the absence of response from the
French tax authorities within this period of time, the foreign company or
individual will be deemed not to have a PE in France.

France provides for other specific rulings (e.g. for R&D activities eligible to
R&D tax credit).

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Payroll tax

Companies that are not liable for VAT on at least 90% of their annual
turnover are subject to payroll tax (taxe sur les salaries) regarding
salaries paid during the following calendar year. Companies below the
90% threshold trigger are liable for the payroll tax on the complement of
their VAT recovery ratio, called the counter VAT recovery ratio.

The standard rate of the payroll tax is 4.25%, but increased rates apply to
gross individual wages that exceed certain thresholds. Those increased
rates are:

 8.5% for wages ranging from EUR 8,020 to EUR 16,013.

 13.6% for wages in excess of EUR 16,013.

French social security contributions

The French social security system is composed of various schemes

providing a wide range of benefits. This system includes social security
basic coverage, unemployment benefits, compulsory complementary
retirement plans, complementary death/disability coverage, and
complementary health coverage.

The contributions are shared between employer and employee; on

average the employer's share of contributions represents 45% of the
gross salary. For 2021, the employee’s share of French social
contributions represents approximately 20% to 23% of the remuneration.
However, since the contributions are assessed using various ceilings, the
average rate will decrease as the gross salary increases.

Employers' contributions made to additional medical coverage schemes

(which are mandatory and collective) are taxable.

Generally, for any employee who carries out a salaried activity in France,
the employer withholds the employer's and employee's share of French
social security charges.

France

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Individual - Other taxes

French social security contributions

The French social security system is composed of various schemes

providing a wide range of benefits. This system includes social security
basic coverage (sickness, maternity, disability, death, work-related
accident benefits, and old age state pension), unemployment benefits,
compulsory complementary retirement plans, complementary
death/disability coverage, and complementary health coverage.

The contributions are shared between employer and employee; on

average the employer's share of contributions represents 45% of the
gross salary. For 2021, the employee’s share of French social
contributions represents approximately 20% to 23% of the remuneration.
However, since the contributions are assessed using various ceilings, the
average rate will decrease as the gross salary increases.

Employers' contributions made to additional medical coverage schemes

(which are mandatory and collective) are taxable.

Generally, for any employee who carries out a salaried activity in France,
the employer withholds the employer's share and pays the employer's
share of French social security charges. However, France has entered into
agreements with more than 40 countries whereby expatriates temporarily
transferred to France may remain under the home country social security
schemes and are exempt from French charges (scope of the exemption
according to the applicable provision of the bilateral agreement), provided
they hold a valid certificate of coverage.

Capital gains tax

Capital gains tax on securities

Capital gains derived from the sale of securities are subject to PIT at a flat
tax rate (PFU) of 30% (12.8% for income tax, plus social levies at a rate of
17.2%), and, if applicable, to the exceptional income tax for high earners
at a maximum marginal tax rate of 4%.

Taxpayers with low income may have interest to opt to tax the capital
gains at the progressive income tax rates.

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If they opt for a taxation at the progressive income tax rates, they can
benefit from a rebate for length of holding, but only for shares acquired or
subscribed before 1 January 2018.

This rebate for length of holding is as follows:

 50% for holding between two and eight years.

 65% after eight years of holding.

The PFU also applies to capital gains due upon transfer of tax residency
outside of France (i.e. exit tax).

A specific regime applies to capital gains derived from sales of shares in

small and medium companies (PMEs) created less than ten years ago and
to capital gains currently taxed under a preferential regime (notably
regimes applicable to young innovative companies' securities), assuming
that the shares were acquired before 1 January 2018 and that the
taxpayer chose to opt for the taxation at the progressive income tax
rates. It consists of a rebate for length of holding on the net gain, as
follows:

 50% for holding between one and four years.

 65% for holding between four and eight years.
 85% after eight years of holding.

On top of this increased rebate, a preliminary fixed tax allowance of EUR

500,000 applies for PME executives upon retirement.

The above rebates only apply to income tax and not to social surtaxes,
which remain due at the rate of 17.2%.

France
Individual - Tax administration
Last reviewed - 27 September 2021
Tax returns

Husbands and wives or partners of a PACS must file joint returns (except
the year of marriage/the year the PACS is signed, where spouses/partners

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can opt to file separate tax returns for the whole year). Otherwise,
separate filing status is not permitted, except under strictly limited
circumstances.

French resident tax returns are based on calendar-year income and must
be filed, in principle, by mid-May of the following year (the exact filing
deadline is confirmed each year by the French tax authorities).

E-filing

The taxpayers whose main home is equipped with access to the Internet
should file their tax return online on the government website.

A fixed EUR 15 fine by tax return will be applied after two breaches,
except in particular cases (e.g. the elderly who have no access to the
Internet).

Payment of tax

As of 1 January 2019, for French resident taxpayers, a WHT system has

been implemented. The scope of income subject to the WHT system is
very wide and covers most categories of income: employment income,
pensions, replacement income, annuities, self-employment income
(industrial and commercial, non-commercial, agricultural), and rental
income.

For taxpayers who have already filed a French tax return, the French tax
authorities calculate the applicable WHT rate to be applied on
employment income or the amount of monthly instalments to be paid by
taxpayers based on the last tax return submitted by the taxpayers. The
WHT rate or the instalment amount is revised each year in September
after the filing of the annual tax return. The tax rate applied is an average
tax rate calculated for the household. It is possible to request the
application of an individualised tax rate for each spouse. It is also possible
to request a modulation of the applicable WHT rate in case of change of
personal situation or income.

When a tax rate is not available (e.g. for taxpayers who have never filed a
French tax return), employers apply a neutral tax rate on compensation,

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depending on the level of income. It is possible to request a personalised

WHT rate by filing a form (2043 Form).

Considering the risk of potential penalty, specific advice from a tax

advisor is required to request or adjust the applicable WHT rate.

The filing of an annual tax return is still required. However, since 2020,
the declaration is simplified for certain taxpayers. The automatic
declaration is a new declarative mode allowing certain tax households to
benefit from automatic validation of their tax returns, without any action
on their part, as long as the information pre-filled and known to the tax
authorities is accurate and exhaustive for the calculation of income tax.
For the tax households concerned, the absence of filing will now be
considered as a declaration. To be eligible, households must meet two
conditions:

- they should have been taxed the precedent year only on income pre-
filled by the tax authorities and

- they should not have reported any changes in status (address, marital
status or creation of a withholding tax account) the precedent year.

If the final tax liability per the annual tax return is higher than the
withholdings, the taxpayer is required to pay the balance to the
authorities, in principle spread from September to December. If the tax
withheld is more than the computed tax on the tax return, the French
authorities will refund the difference.

For non-resident taxpayers deriving income from employment and

professional activities exercised in France, a WHT mechanism is applied;
tax at flat rates of 0%, 12%, and 20% is withheld at source for
employment compensation. An annual income tax return is required if the
income subject to WHT falls into the 20% WHT bracket and additional tax
may be due.

In addition, there is a tax withholding obligation on French-source stock

options (granted from 20 June 2007) and free share award gains realised
as of 1 April 2011 by non-resident taxpayers of France.

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Other French-source income may also be subject to WHTs and annual

reporting.

Tax audit process

The French Tax Administration can verify the accuracy and correctness of
the tax return and can provide a control on the document provided. The
French Tax Administration analyses the consistency between declared
income, the financial situation, and the household's lifestyle.

When disbursements exceed receipts, the difference is considered hidden

income unless the taxpayer responds satisfactorily to a request for
clarification or justification.

Statute of limitations

The statute of limitations in France is, in general, for three years (period
called délai de reprise). It has been extended for one year for the year
2018 ('tax holiday year')

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