France To Cut Corporate Tax Rate To 25% By 2022

The Budget Act for 2018 in France has introduced a series of significant changes to tax treatments of business, including a reduced corporate tax rate, abolition of tax on dividend distributed, more tolerant financial expense deduction, and transfer pricing documentation requirement.

Reduced Corporate Income Tax

The budget indicates a year-by-year reduction in corporate tax. Current income tax rate for enterprises is 33.33%, and a lower rate of 28% will be applied to the first 500 thousand euros of profits in 2018, with the exceeding part continually applying the standard rate. The standard rate is to decrease to 31% in 2019 with the treatment to the first 500 thousand unchanged. In 2020, the standard rate will keep declining to 28% and then to 26.5% in 2021. Ultimately, in 2022, the rate will be set 25%.

Other Incentives

The 3% levy on distributions since 2012 will be cancelled under the budget. And the financial cost for funding acquisition will be deductible starting January 1, 2018 if it could be proved that effective control is exercised by the acquiring company itself, or a company established with the EU, a company established in France or a company that directly controls or is controlled by the acquiring company. Such a company (other than the acquiring company) should be established in France, or have its headquarters in the Union or in an EEA state with a combating tax fraud and evasion treaty with France.

Sources: Lexology, Lexology

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