The Finance Bill for 2013 (December 30th, 2012, n° 2012-1509) and the 3rd Amending Finance Bill for 2012 (December 30 th, 2012 n° 2012-1510) have been approved by the French Parliament with Court, with significant reserves from the French Supreme Court.
This Tax Alert summarizes the main relevant budget measures for corporations and individuals, including multinational corporations with operations in France.
TAX CREDIT FOR COMPETITIVENESS AND EMPLOYMENT
A new tax credit (CICE) calculated on wages paid to employees earning less than 2.5 times the French minimum wage (17,112 per year) has been introduced to improve business competitiveness.
The rate of the CICE is 4% for 2013 and 6% from 2014 onward. It is determined on a calendar year basis.
The tax credit can be set off against the corporate income tax liability due by the taxpayer in respect the fiscal year during which the wages have been paid. Excess tax credit can be carried forward for a maximum of three years. Unused credit after this three year period may be refunded. SMEs may benefit from immediate refunds.
PARTICIPATION EXEMPTION ON CAPITAL GAINS
Capital gains realized on participation shares held for more than two years are exempt, apart from a share of the costs and charges that remains subject to corporate income tax at 33.1/3%. This taxable share has been raised by 20%, from 10% to 12% (ETR of 4%, additional contributions excluded) and is now calculated on the gross amount of gains, notwithstanding any capital losses (in the past, the taxable portion used to be determined after deduction of capital losses).
For tax-consolidated groups, these new rules apply to intra-group transactions that were neutralized under the previous rules, i.e. reintegration shall be made on 12% of the gross capital gains where neutralization was made on 10% of the net capital gains. This will penalize companies exiting tax-consolidated groups.
The new regime applies to fiscal years ended as from December 31st, 2012.
RELOCATION OF REGISTERED OFFICES WITHIN THE EU
When a French company relocates its headquarters outside France, unrealized capital gains are immediately taxed.
For relocations within the EU, taxation may be avoided if the headquarters' assets remain in France in a permanent establishment. Any transfer of these assets outside France triggers capital gains taxation, which used to be paid immediately under the previously applicable rules. In order to comply with the latest ECJ decisions (EUJ, September 6th, 2012, n° C-38/10, EC v. Portuguese Republic & EUJ, September 28 th, 2012, n° 371/10, National Grid Indus BV), an option to divide payment over five years is introduced for asset transfers within...