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Business Taxation for Expats in France

Submitted: January 2014

The authority responsible for French Tax is the Direction Générale des Impôts (DGI). The website for the DGI is here.



Registration

For expats the simplest form of business structure in France is the limited liability company, there are three kinds, but only two a generally used for smaller businesses: the société à responsabilité limitée (SARL) and the société par actions simplifiée (SAS). A SARL requires a minimum share capital of €1, and can have as few as one shareholder, but no more than 100. An SAS has no minimum share capital, and can have as few as one shareholder, and can be managed by one person elected as a chairman. An SAS does not require a statutory auditor; provided the balance sheet is less than €1m and turnover is less than €2m. Forming either company means that your liability is limited to your equity in the company. The business income is taxed at the corporate tax rate. Another possible choice is a sole proprietorship (entreprise individuelle (EI)), however with these your liability extends to your own personal assets. EIs are often used by professionals (dentists etc), artisans and shop owners. There is also an entreprise individuelle à responsabilité limitée (EIRL) in which your liability is limited. Business income profits subject to personal income tax at progressive rates.

To register your company you must find the Centre de Formalités des Entreprises (CFE) appropriate for your business, generally this will either be the Chamber of Commerce (Chambre de Commerce et d’industrie), which covers commercial enterprises, or the Chamber of Trade (Chambre de Métiers et Artisans) which covers artisans and traders. The CFE will provide the necessary registration forms and forward them on to all the other interested statutory bodies, including the DGI and the social security department. This will allow you to acquire a taxpayer identification number (TIN).


Corporate Income Tax (CIT)

The French tax year for companies runs from 1 January to 31 December. If a company’s accounting year is different to the tax year, its tax return period will be based on that year. French resident and non-resident companies are generally only liable for corporate income tax on their French source income and capital gains.

The corporate income tax rate is 33.33%.

Companies whose turnover exceeds €7.63m and whose tax payable exceeds €763,000 are subject to the social contribution at a rate of 3.3% on the tax payable in excess of the limit. There is also a temporary surcharge of 5% of tax payable for certain high turnover companies.

For small companies there is a reduced rate of CIT of 15% on the first €38,120 of taxable income, subject to certain conditions. Companies that fulfil these conditions are not liable to the social contribution.

There is a reduced rate of 15% on royalties and on certain capital gains associated with patents which have been held for more than two years, subject to certain conditions. The rate also applies to gains made on shares in venture capital funds or companies held for at least five years.

In France capital gains are treated as ordinary income and taxed as such. Capital losses can be used to offset trading gains.

Companies must file their French corporate income tax returns by 31 May of the year following the year in which the income was generated. Returns may be filed electronically.

Advance payments of corporate and trade tax must be made in instalments four times a year, in March, June, September and December. The amount payable for the first three is based on the previous year’s assessment. The final payment is based on an estimate of the current year’s tax liability. There is also a final balancing tax payment (if applicable) which must be made once the actual amount due is calculated. This is due on the 15th day of the fourth month following the fiscal year end. Returns should be filed with three months of the fiscal year end. Penalties apply for late payment of tax.

 

 

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