The CET tax: Contribution Economique Territoriale (Territorial Economic Contribution)

The Contribution Economique Territoriale (CET) is a local tax that replaced the taxe professionnelle (TP) on January 1, 2010.

The aim of this reform was toreduce the tax burden on businesses, and this has been achieved. In fact, unlike household taxation, which has risen steadily, local business taxation (€26.1 bn in 2016) is fairly stable from one year to the next, and well below its 2010 level (€31.3 bn).

This new local tax, known as the Contribution Economique Territoriale, is actually made up of two taxes:

• Cotisation Foncière des Entreprises (CFE), for which only communes are beneficiaries;

• and the Cotisation sur la Valeur Ajoutée des Entreprises (CVAE), the proceeds of which are divided between the communes (26.5%), départements (23.5%) and regions (50%).

1. Business property tax (CFE)

The Cotisation Foncière des Entreprises (CFE) is levied on individuals and legal entities carrying on a self-employed activity, and does not benefit from any exemptions. It should also be noted that a company is liable for CFE in each commune where it owns premises or land.

However, many businesses and professionals are permanently exempt from CFE. These include farmers, fishermen, artists (photographers, painters, authors, etc.), craftsmen and athletes. For a complete list of all CFE-exempt businesses, and the conditions under which they are exempt, go to the article "Who is exempt from CFE" on the public service website.

It should also be pointed out that in the year of their creation, a temporary exemption is provided for new businesses, including auto-entrepreneurs, which carry out a craft, commercial or liberal activity as a micro-enterprise.

The CFE tax base is calculated on the basis of the rental value of property subject to property tax and used by the company for business purposes during the reference period, i.e. year N-2. The rental value used to calculate the CFE thus corresponds to the amount used by the tax authorities to calculate the property tax.

To obtain the amount of CFE you are liable to pay, multiply the tax base calculated above by the tax rate applicable in the commune where you own a plot of land or an establishment used for your business. Note that this tax rate varies considerably from one commune to another.

Once the CFE has been calculated, it can be reduced by tax rebates or credits. In all cases, companies liable for CFE must pay a minimum contribution based on their sales. These are set by each municipality, but are governed by a national scale.

2. The Cotisation sur la Valeur Ajoutée des Entreprises (CVAE), a tax on the added value of businesses

The CVAE applies to individuals and companies that :

• The following are subject to CVAE;

• Exercise a self-employed professional activity on a regular basis on French territory;

• And have sales in excess of €152,500.

The CVAE is calculated on the company's Tax Value Added (which differs from its Book Value Added). And unlike the CFE, the CVAE tax base does not benefit from any tax relief measures.

The amount due in respect of CVAE is thus the product of the taxable added value and the CVAE rate, the latter being a function of your sales. However, if your annual sales are less than €500,000, the applicable CVAE rate is 0%, so you pay no CVAE at all.

 3. Declaration and payment of the Contribution Economique Territoriale

To make your declarations and payments, the easiest way is to visit the CFE and CVAE pages on the public service website. You'll find detailed explanations, forms for declaring your CFE and CVAE, and links to online payments via the Compte Fiscal en Ligne pour les Professionnels.

In all cases, you can contact the Service des Impôts des Entreprises (SIE) if you encounter any difficulties.

Finally, it's important to note that the Contribution Economique Territoriale, made up of CFE and CVAE, is capped at 3% of a company's added value. In other words, companies whose total CFE and CVAE tax liability exceeds 3% of their value added may apply for a tax rebate. This rebate will represent the difference between the tax due and the 3% ceiling.

Now you know all about the Contribution Territoriale Economique! As you're sure to understand, domiciling your business with a domiciliation company like Sedomicilier.fr in a city like Paris, where the CFE rate is low, can also be a real advantage when it comes to paying lower local taxes!