As a global economic power with a highly qualified workforce and great connections to the rest of Europe, France is an appealing place to conduct business. But whether you’re just starting up or thinking of expanding your current business to a new EU country, there’s one thing every business in France needs to budget for and that’s paying taxes. French corporate tax isn’t especially high or complicated but it’s well worth knowing what you’ll be dealing with if you’re thinking of having a business presence in France.
Taxation in France | What is the tax year in France?
In France the tax year usually follows the calendar year, for example January 2019 to January 2020. All pre-filled tax returns (déclaration de revenus pré-remplie) are due annually on 31 May for the previous calendar year. French corporate tax needs to be paid each quarter, with payment dates falling on:
- 15th March
- 15th June
- 15th September
- 15th December
If you’ve only just started trading, or you’re earning less than €3,000 a year, you can pay French corporate tax yearly instead. Payments are normally made online, whether for quarter or whole fiscal years. This is usually handled by the accounting department in large companies, but if you’re a smaller company you can find out more about paying corporation tax on the French government website.
Paying French corporate tax as a resident vs non-resident company
As in many countries, the French corporate tax you’ll pay will depend on whether you’re running a business in the country (known as a resident company) or if your business operates from another country and you trade in France. You’re considered to be a resident company if your company is incorporated under French commercial law or:
- conducts business through a branch or office in France
- has a dependent agent in France
- completes a ‘full commercial cycle’ in France
If you’re a resident company you’ll need to pay French corporate tax on your French-source income. This means you’ll pay tax on any profits generated in France, but usually also from business generated in other countries where you’re classed as a non-resident company. This is because as a French resident company the money was earned while physically being based in France. The taxable income for a non-resident company is different. If you’re not a French resident company, for example because you’re registered in and operate from the UK, your taxable profit is only on income:
- that can be attributed to business activity in France
- from real estate located in France
This means that cross-border companies who only trade in France without being based there would usually have a lower taxable income liability than a French resident company. If you’re not sure if your business counts as a resident company, or if you have some flexibility about which EU country you operate from, it’s worth talking to your accountants. Trading as a non-resident company could save you a significant amount of French corporate tax. If you’re a non-resident company needing to pay French corporate tax you can make further savings with an overseas business account. By opening an account with a foreign exchange specialist like WorldFirst, you can save on foreign exchange fees.
Corporate tax rates 2020 | What are the tax rates in France?
The corporate income tax rate in France depends on your annual turnover. For the tax year January 2019 to January 2020 most companies will pay 28% as this is the rate for taxable income up to €250 million. Once your company generates more than €250 million in taxable income a different rate applies. You’ll pay 28% on the first €500,000, then 31% on any taxable income above this. Non-profit organizations, like charities, have special corporate income tax rates.
For the 2020 fiscal year it’s 24% for income from property (e.g. real estate rentals) and 10% for income from movable property (e.g. bonds). If your company sells a building or other real estate, you’ll pay 19% capital gains tax. This rate is based on the company committing to keep the building, the title or the rights for five years. A withholding tax of 28% is due on any dividends paid to a non-resident shareholder. There is, however, a tax treaty in place that means you don’t have to pay the withholding tax on dividends paid to a French corporation from a qualifying EU parent company.
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Changes to French corporate tax due to coronavirus
In order to help businesses affected by coronavirus, the Direction General Des Finances Publiques have put special measures in place. The Covid-19 settlement plan supports very small businesses and small and medium size enterprises (SMEs) who started their business activity on or before December 31st 2019. It gives affected businesses greater flexibility on when they pay outstanding corporate taxes and VAT that were due between 1st March and May 31st 2020. Businesses can apply for the Covid-19 settlement plan for reducing or delaying taxes until they’re better able to pay if:
- their tax reporting is up to date
- they have less than 250 employees
- their turnover before tax is less than €50 million
Fill in the Covid 19 settlement plan form to apply. Businesses can also postpone payroll tax payments for this tax year. Currently payments due up to August 2020 can be delayed and further measures may be put in place. See the Direction General Des Finances Publiques FAQs for more details.
Can I choose to only pay income tax?
It seems there’s some flexibility for certain businesses to choose whether they pay French corporate tax or income tax. If you have a small, joint ownership limited company, for the first five years of business you can choose to be taxed within the personal income tax system or to pay corporate tax.
Similarly, if you operate as an Entrepreneur of an Individual Limited Liability (so you and your assets are separate) you can pay tax through your French income tax return or you can pay French corporate tax. If you’re operating as a sole trader, your taxable income will automatically fall within the personal income tax system as you and your business are one legal entity. You have to pay corporation tax if you’re a:
- Public limited company
- Limited liability company
- Partnership limited by shares
- Simplified joint stock company
- Self-employed company
- Professional union for activities relating to the defence of the rights and interests of your members
Claiming research and development tax reliefs
Businesses can claim French tax credits on eligible research and development expenses. This gives the business 30% of the cost of the expenses during the tax year up to a limit of €100 million. For large companies spending more than this on research and development, you can claim 5% in tax credits on expenses over €100 million. Eligible research and development expenses include costs relating to:
- Equipment (fixed assets) needed for the R&D work
- Staff qualifying as scientists or engineers
- Patent registration or defence of patents, including insurance contracts relating to the legal defence of patents
- The monitoring of technical developments