Thecorporate income tax (Impôt sur les Sociétés - IS) is a tax levied each year by the Direction Générale des Finances Publiques, the calculation of which can vary according to a number of criteria. Theoretically, only companies operating in France are subject to this tax.
They are not taxed in France on income generated abroad. What is the tax base? What rate should be applied? What changes can you expect for your corporation tax in the coming years?
Here are all the answers to your questions
The first question to ask is whether you are liable for corporation tax. You are only liable for corporation tax on the basis of :
- Your type of business: corporations, partnerships limited by shares, limited liability companies, cooperatives and their associations, general partnerships, civil partnerships and joint ventures are generally covered;
- Your tax regime: many types of business can choose a different tax regime when they set up their business (income tax or corporation tax).
All companies concerned are taxed directly on their profits. Companies are required to make quarterly advance payments of corporation tax to the tax authorities, calculating and paying it spontaneously in 4 installments on March 15, June 15, September 15 and December 15.
Exempt from this tax are companies whose reference year does not exist (i.e. those whose first year of existence), or is loss-making; or when the amount of corporation tax paid in the previous year is less than €3,000.
IS installments and balances can be settled by applying tax credit reductions
Payment of the balance of corporation tax corresponds to the total amount to be paid, less any advance payments already made.
The standard rate is set at 33.1/3% of total taxable profits. This rate must be calculated on the basis of taxable profits rounded up to the nearest euro, with no deduction from the base and no discount for low taxes.
The reduced rate is applied in the following cases:
- The company's pre-tax sales are less than €7,630,000;
- At least 75% of the capital is held by individuals, either directly or through intermediary companies;
- The capital is fully paid up.
The reduced rate applies to the following brackets:
- 15% tax between 0 and €38,120;
- 28% tax between €38,120 and €75 ,000.
Companies are required to pay the Contribution Sociale sur les Bénéfices (CSB), which amounts to 3.3% of corporate income tax, on the same dates.
There is also an exceptional tax for all companies with sales in excess of €1 billion. They must pay the advance when they pay the 4th installment of corporation tax, and the balance when they pay their corporation tax.
An additional tax is levied on all companies with sales in excess of €3 billion. It must be paid spontaneously, in full, with the 1st instalment of corporate income tax.
Each of these two taxes corresponds to a 15% increase in the initial amount of corporate income tax. Companies with sales of between €1 and €3 billion will therefore pay 39.43% corporation tax, while those with sales of over €3 billion will be taxed at 44.43%.
The Philippe government's plans call for a gradual reduction in the corporate income tax rate to 25% by 2022.
In 2018, profits will be taxed as follows:
- 28% between €0 and €500,000;
- 33.1/3% thereafter.
Government forecasts predict 2019 :
- 28% between €0 and €500,000;
- 31% above.
All profits should be taxed at 28% in 2020, 26.5% in 2021 and 25% in 2022.
From 2019, any company with sales of €50 million or less will be eligible for the reduced rate. The value of the rate will remain unchanged.
Each year, IS must be paid in full to thetax authorities by the 15th of the fourth month following the close of the company's financial year, by means of the advance payment statement n°2571 and the balance statement n°2572. I
This is an annual process for all companies subject to the tax, and changes to the tax rates should lead to a reduction in taxation.
Written by our expert Paul LASBARRERES-CANDAU
February 19, 2018
