1 Basic framework
1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
There is a single corporate tax regime.
1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
A corporate entity is subject to corporate income tax at the standard rate of 31% for 2019 and 28% for 2020. This standard rate is expected to increase to 25% by 2022.
Corporate income tax is applicable at a rate of 10% to income received as consideration for the use (licences or sub-licences) or the sale (capital gains) of industrial property rights under certain conditions (please see question 2.5).
Corporate entities are also subject to a local economic contribution (ie, a local business tax) (CET), comprising the corporate property contribution (CFE) and the business value-added contribution (CVAE). The CFE contribution is payable only by corporate entities whose income is higher than 152,500. It is based on the rental value of any real estate that is subject to property tax and used by corporate entities for business purposes. The CVAE contribution is payable only by corporate entities whose income is 500,000 or more. The rate ranges from 0% to 1.5%, depending on the value added generated by the corporate entity. The CET contribution is capped at 3% of the value added generated by the corporate entity. This contribution is deductible from the corporate tax base.
The corporate social solidarity contribution is applicable to companies whose revenues exceed 19 million. The rate is 0.16% of any revenues above this amount. The corporate social solidarity contribution is deductible from the tax base of the corporate entity for corporate income tax purposes.
All property owners are subject to property tax. The value of this tax varies according to the property's location and is based on the land registry rental value of the land on which the building stands, minus a 50% fixed rebate for costs. Property tax is deductible from the tax base of the corporate entity for corporate income tax purposes.
Transfer taxes are also applicable to various transfers made by corporate entities - for example:
5.09% or 5.8% (in most French regions) of the price for the acquisition of land or buildings located in France; and 3% or 5% of the price for the acquisition of goodwill. Other taxes also apply to corporate entities, such as:
payroll taxes on employees' remuneration, which is payable by corporate entities subject to VAT less than 90% of their turnover in the year before the payment of remuneration; a tax on company cars; a tax on polluting activities; and excise duty on certain products sold by corporate entities, such as gas, alcoholic beverages and tobacco products.
1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
The corporate tax base comprises the earnings generated by companies operating in France after the deduction of all deductible expenses, as booked in the profit and loss statement. Fixed assets are depreciated on a straight-line basis over their expected operating life. However, some expenses may be depreciated on an accelerated basis. Certain types of provisions are also permitted (eg, for depreciation, risks, renovations, price increases). All business expenses are in principle deductible, except where French tax law provides otherwise. For example, there are some limitations to the deductibility of financial expenses. The deductibility of certain expenses is expressly forbidden, such as the tax on company cars and provisions for retirement indemnities.
1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
Yes - 5% of the gross amount of dividends which are eligible for the parent-subsidiary tax regime is included in the corporate entity's tax base (ie, effective taxation between 1.55% and 1.72%). However, distributions from corporate income tax exempted companies, such as real estate investment trusts, are in principle excluded from the participation exemption regime.
Only 1% of the gross amount of dividends is included in a corporate entity's taxable result where the dividends are:
distributed within a tax consolidated group; or paid by a subsidiary held at 95% or more established in another EU member state, or in Iceland, Norway or Liechtenstein, and which is liable to pay an equivalent of the French corporate tax (ie, effective taxation between 0.31% and 0.34%). Only 12% of the gross amount of capital gains eligible for the tax exemption regime (ie, the transfer of share capital from a minimum shareholding of 5% held for a minimum holding period of two years - the shares of real estate companies are excluded from the participation exemption regime) is included in the corporate entity's tax base (ie, effective taxation between 3.72% and 4.13%).
1.5 Is the regime a worldwide or territorial regime, or a mixture?
The corporate income tax is a territorial regime under which only profits made by corporate entities operating in France are liable to corporate income tax, regardless of nationality. The term 'operating in France' refers to a corporate entity which carries on a regular business in France - whether from a fixed base or, if there is no fixed base, through representatives without independent professional status or as part of operations forming a complete business cycle.
1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
Tax losses recorded by a company in France, including start-up losses, can be carried forward or back. Tax losses can be carried forward indefinitely, provided that there is no change in the activity generating the tax losses. In each financial year, companies may offset tax losses of up to 1 million + 50% of profits exceeding 1 million. The tax losses can be offset against the previous year's earnings up to 1 million ('carried-back losses'), creating a corporate income tax receivable. After a five-year period, the balance of the corporate income tax receivable not used to pay the corporate income tax can be reimbursed to the company upon request. The corporate entity can also decide to transform it into cash through a financial institution.
1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
Only the named or legal owner of the income is taxed, except where the foreign-controlled company rules apply (Article 209B of the French Tax Code - please see question 5.3). In practice, the concept of beneficial owner is used by the French Tax Administration to deny the application of a double tax treaty provision where it is applicable or included in anti-abuse provisions.
1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?
Yes - a 15% corporate income tax rate applies to certain small and medium-sized enterprises (SMEs) (ie, corporate entities which have a turnover below 7.63 million and where 75% of the voting rights and financial rights are held by natural persons on a continuous basis and/or by other SMEs), on that part of their profits that falls below the 38,120 threshold.
The corporate income tax rate is currently 28% on earnings up to 500,000 and 31% above this threshold (except for companies with a turnover equal to or higher than 250 million, in which case the corporate income tax rate remains at 33.33% for 2019).
As from 2020, there will be only the 15% reduced rate (up to 38,120) for SMEs and the 28% standard corporate income tax rate for all other corporate entities.
1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
Civil partnerships which conduct commercial activities are automatically liable for corporate income tax. They can also be liable for other corporate taxes (as described in question 1.2).
The following entities (barring exceptions) can opt for corporate tax:
partnerships, notably general partnerships; civil law corporations (except for civil construction-sale companies); limited partnerships; joint ventures; and limited companies and private limited farm companies, where the sole shareholder is a physical person. This possibility has also been extended to limited liability sole proprietorships. The option must be explicit and is irrevocable unless it is waived before the end of the fifth financial year following exercise of this option.
In general, any entity which is considered to conduct economic activities can be liable for corporate taxes (as described in question 2.1).
2 Special regimes
2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?
A specific corporate tax exemption exists for certain listed real estate companies (sociétés d'investissement immobilier cotées (SIICs)) and their 95% owned subsidiaries (which opt for the SIIC tax regime), as long as they comply with the relevant distribution obligations (ie, distribution of 95% of their rental income, 60% of their capital gains and 100% of the dividends they receive where such income is derived from the exempt tax sector).
An SIIC and its subsidiaries can have a taxable sector (comprising ineligible assets and activities), provided that this represents less than 20% of their assets. Real estate mutual funds (approved by the Financial Markets Authority) are also eligible for a corporate tax exemption, as long as they comply with the relevant distribution obligations (85% of net income from real estate assets, 50% of net capital gains on disposals of assets and 100% of dividends from unlisted...