France

Tax rates 2012 France

Corporate tax

Rate

The standard corporate tax rate of France is 33,33%. However, the overall effective corporate tax rate is 34,43% due to a social surcharge of 3,3% which applies to corporate income tax liability which exceeds EUR 763.000. Large companies (turnover above EUR 250 million) have a overall effective tax rate of between 35% and 36,1% due to a 5% temporrary surtax. Newly started businesses or small enterprises may enjoy lower tax rates.

Taxation of dividends

Dividends are considered taxable income. Participation exemption applies to dividends from qualifying subsidiaries. A participation exemption may apply on dividends where the recipient owns a minimum of 5% of the shares of the distributing entity and certain conditions are met. A participation exemption also may apply for capital gains derived from the sales of shares from a substantial investment if certain conditions are met.

Capital gains

Capital gains are subject to corporate tax at standard rate. Capital profits coming from qualifying subsidiaries can benefit from participation exemption.

Losses

Losses can be carried forward indefinitely. Losses can be offset againts the taxable profit of a certain year up to EUR 1 million plus 60% of the taxable result for the fiscal year.

Losses can be carried back 1 year, up to an amount of EUR 1 million, if certain conditions have been met.

Withholding tax

Dividend is subject to a 30% witholding tax (calculated on gross dividend) if it is paid from a french corporation to a nonresident shareholder. Different rules apply if there is a tax treaty or EU-parent-subsidiary directive in place. Dividends payed by a french corporation to a qualifying EU parent company are exempt from witholding tax under the EU-directive.

In general there is no taxation levied on interest if the interest is payed by a french company to a nonresident lender.

Royalties to non-residents corporations are subject to a 33,33% withholding tax. The rate can be reduced or eliminated under a treaty or the EU interest and royalty directive.

Fees payed for commissions, consultancy fees and services are subject to 33,33% witholding tax. The rate can be reduced or eliminated under a treaty or the EU interest and royalty directive.

 

Individual tax

General

Domiciled individuals are also considered residents of France. To be considered domiciled the individual must have a principal residence,  a prinicipal business or a principal part of financial interest. Individuals residing in France are taxed on worldwide income. Non-residents are taxed on their French-source income solely.

Taxable income

Taxable income for an individual is considered to conclude employment, business, real estate, capital, and investment. There is a “Tax Shield” available that caps the maximum amont of tax any resident is subject to at 50% of income. This 50% rule also includes the french wealth tax.

Rates

Progressive tax rates between 5,5% and 41% apply. Also a social security surcharge applies of a maximum 13,5%. On income exceeding EUR 250.000 for individuals (or EUR for married couples) an temporary contribution of 3% applies. The temporary contribution is 4% for income above EUR 500.000 for individuals (or EUR 1 million for married couples). The temporary contribution will apply until the french government achieves a zero deficit.

Capital Gains

Capital gains from stocks, bonds and other movable assets are taxed at 19%. Capital gains from immovable property are also taxed at 19%. Both these tax rates are subject to an additional social security surcharge of approximately 13,5%.

Deductions

Some types of expenses and investments that are related to the family situation of the resident can be subject for deductions and allowances.

Real Estate

Property owners are liable for a tax based on estimated rental value of the property. Property occupants are liable for a dwelling tax based on the estimated rental value. The estimated rental value is done by the french tax authorities.

Net Worth Tax

Households with a net worth exceeding EUR 1.300.000 pay net worth tax. The rate is 0,25% if assets are under EUR 3 million and 0,5% if assets are above EUR 3 million.

Inheritance Tax

In general tax rates for inheritance and gifts/transfers ranges from 5% up to 40% after a rebate of up to EUR 159.325 per child.

Social Security

Employed individuals contributes to the social security. Social security contributions are approximately 20% and are deducted at source from salary payments to the employee.

Contributions from the company vary greatly based on a number of factors but can be as high as 50% of employee gross pay.

VAT

VAT applies to all sales of goods and services. The VAT is 19,6%. Lower rates of 5,5% or 7% apply for food products and some other items. Certain transactions are exempt from VAT.

 

Other

Tax year. Calendar year. For corporations the year-end-date is allowed to be altered.

Tax treaties. France has more than a 100 tax treaties.

Filing requirements. Filing for VAT can vary depending on activity type and certain other factors. Filing requirements can be monthly, quarterly or annually.

Corporate tax returns are due by 30 April. Income tax return for individuals must be filed by 31 May for the previous year.

Registration (for VAT purpose). All corporationsor entities that are subject to VAT must register with the tax authorities.

 

Links

Tax authorities. French Tax Administration

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)