Tax Law in France
The French system of taxation differs from our by higher importance of indirect taxes. Furthermore, there is a number of individual taxes with various principle of selection, which increase the company administrative costs.
Legal Entity Income Tax
(Impôt sur les Sociétés)
Not only capital companies (SA, SAS, SARL), but also the limited partners of French KG (SNC, SCS, SCA) are liable to legal entity income tax. It is calculated from profits prior to their distribution. The territorial principle is enforced, according to which the companies residing in France or abroad are liable to legal entity income tax only for the profit achieved in France. Further, the Treaty on prevention from double taxation is valid.
The base rate of French legal entity income tax after the fiscal reform on December 2000 already amounts 33.33 per cent, including 1 per cent Contribution Sociale sur les Bénéfices (+“Taxe juppé“ 2 per cent 2005). The small and medium size companies with turnover less than 7.630.000 EUR, that are owned at least at 75 per cent by natural persons and their fixed assets are paid in full amount, after 2002 can be taxed up to the amount 38.120 EUR with rate of 15 per cent.
The system for the legal entity and natural person income taxes is planned in advance payments in a form of quarterly advance payments based on taxable incomes for previous year, which are to be paid always on 15th of March, June, September and December.
Independent from the annual economic result, every year on March 15 the minimum legal entity income tax is due (Imposition forfaitaire annuelle des sociétés). This one is calculated according to turnover and moves between 1.300 EUR (with turnover between 400.000 and 750.000 EUR) and 110.000 EUR (with turnover exceeding 500 mil. EUR). The minimum tax, when compared to standard legal entity income tax, is calculated according to individual profits achieved during two successive years. In case of more successive years with losses it is then definitive.
Natural Person Income Tax
(Impôt sur le revenu)
The natural persons are liable to pay it. If you are resident outside of France, only French incomes will be taxed. Calculation is made according to gradual rate. For certain income parts are applied different tax rates, the total tax is calculated as the total of individual amounts. For individual regions, the rates of following year (2007) are given for the income of current year (2006).
For taxpayers residential abroad, the minimum tax rate - subject to eventually applied Treaty on prevention from double taxation - amounts 25 per cent.
Natural person income tax rates
| || || ||206|
|0||to||5.614 EUR||0 %|
|5,614||to||11.198 EUR||5.5 %|
|11.198||to||24.872 EUR||14 %|
|24.872||to||66.679 EUR||30 %|
|66.679||EUR and more|| ||40 %|
The base of assess is the utility value of company material means consisting of two factors: from the tax value of land property and 16 per cent of company property. The sum calculated in this way, after 16 %-deduction of lump sum amounts the base of assess that is multiplied by leverage and differs according to region. In principle, the newly founded companies are free from trading tax for the first business year, besides this also some allowances exist for research work and certain regions of France. In case when the trading tax exceeds the certain percentual rate of created value added (valeur ajoutée), the reduction of trading tax can be asked for.
Value Added Tax
(Taxe sur la valeur ajoutée)
The standard rate amounts 19.6 per cent after April 1st, 2000. Majority of deliveries and services is liable to it. The reduced rate amounting 5.5 per cent is valid for most of foodstuffs (excepting the sweets, chocolate products, vegetable oil), untreated agricultural products and fish products, consumption goods for agriculture (as the fertilizers and mess), cultural objects, aids for disabled persons, print’s products, transport of persons and accommodation, transfer of creative rights and copyrights (excepting the area of EDP), services of press agencies, and for pedlary in the area of gastronomy, as well as for certain spheres of building industry. The press, medicaments, animals and certain cultural events have the exemption rate of 2.1 per cent.
The companies - the value added taxpayers can deduct the taxes stated in invoices for the previous performances, as well as the tax calculated from in-house profit and the tax on importation. This deduction from tax can be done immediately.
This tax reduction does not include the personal expenditures, housing costs and cashless purchase of goods.
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