The newsletter summarizes recent tax changes in France that will impact businesses. It outlines reductions to the corporate tax rate over four years to 28% and changes to dividend tax rates. It also discusses the introduction of income tax collected at source from 2018, modifications to vehicle tax depreciation deductions favoring electric vehicles, and an extension of favorable tax treatment for expatriate employees relocating to France post-Brexit.

1. Newsletter March 2017
Our latest newsletter highlights the
main changes introduced by the 2017
Finance Act and other recent key chan-
ges likely to concern groups doing bu-
siness in France.
CORPORATE INCOME TAX RATE
CHANGES
The 2017 Finance Act has initiated a re-
duction in the standard rate of corporation
tax over a 4 year period from 33.33% to
28%. The introduction of this reduction
will be staggered over the financial years
2017 to 2020 as set out below :
2017 - applicable on profits up to €75 000
(after application of the 15% rate on prof-
its up to €38 120) for small and medium
sized businesses (SMEs) with revenues
less than €50 million) with 33.33% re-
maining applicable otherwise.
2018 - applicable on profits up to €500
000 for all businesses then 33.33% rate
applicable above this amount.
2019 - applicable on profits up to €1 000
000 if revenues are less than €1 billion and
up to €500 000 if revenues are greater than
€1 billion. 33.33% rate is applicable above
this.
2020 - applicable on all profits for all busi-
nesses.
An SME is defined under EU regulations
as an autonomous business which does not
exceed 2 out of 3 of the following thresh-
olds :
• employs < 250 employees,
• turnover < €50 million or
• total assets < €43 million
From 1 January 2019, the 15% small com-
panies rate which is currently available to
entities with revenues less than €7.6 mil-
lion and which are owned at least 75%
directly or indirectly owned by individuals
will be available to companies with the
same ownership criteria but having a turn-
over up to €50 million.
3% TAX ON DIVIDENDS
A 3% corporate income tax charge on divi-
dend distributions was introduced by the
2012 Finance Act subject to certain excep-
tions however following a challenge by the
French Constitutional Court in September
2016, the French Tax Administration
(FTA) has modified the scope of exemp-
tions available.
This 3% tax was due on dividend distribu-
tions by French companies and branches
unless the entity was an SME or a member
of a tax consolidation group (which re-
quires a 95% direct or indirect sharehold-
ing by a parent company). Under the origi-
nal legislation, apart from SMEs, only
consolidated groups were exempt which
was judged to be inequitable.
Under Article 31 of the 2016 Finance Act
(Rectified), dividends distributed from 1
January 2017 onwards are now also ex-
empt where a parent hold’s at least 95%
direct or indirect exists – whether a tax
consolidation is present or not .
INCOME TAX AT SOURCE
Article 60 of the 2017 Finance Act intro-
duces a major change to the French in-
come tax system from 1st January 2018
when income tax is to be collected at
source on salaries, pensions, owner-
managed business and certain categories of
property income.
Currently income tax is paid one year in
arrears either via two payments on account
in February and May followed by a bal-
ancing final instalment in September or
over 9 monthly instalments where an elec-
tion in made for monthly direct debit. In
order to eliminate two years being taxed at
the same time in 2018 when the switch to
income tax at source takes place, 2017
normal revenues (but not inhabitual or one
–off revenues) will not be taxed.
In view of the significant impact of this
change, the introduction of income tax at
source will be the subject of a specific
Ferrières & Co newsletter later this year.
EMPLOYMENT TAX CREDIT RATE-
CHANGE
The Crédit Impôt pour la Compétivité et
l’Emploi (or C.I.C.E) was introduced in
2013 to provide a tax credit to businesses
on employee salaries that were below a
threshold of 2.5 times the minimum wage.
From 1 January 2017, the rate of the tax
credit available for offset against a busi-
ness’s corporate income tax charge has
increased from 6% times the amount of
qualifying salaries to 7%. Where corpo-
rate income tax is not payable and conse-
quently no offset is possible, a reimburse-
ment may be claimed after a 3 year period.
TRANSFER PRICING: GROUP
TRANSACTIONS DISCLOSURE
All French businesses which :
♦ have revenues or a balance sheet total
exceeding €400 million;
♦ are a direct or indirect subsidiary
which exceeds this threshold or
♦ has a shareholding in an entity which
exceeds this threshold
are required to file annually a transfer
pricing declaration under Article 223
Quinquies of the Code Général des Impôts
This declaration requires information relat-
ing to international intra-group transac-
tions in excess of €100 000 and disclosure
of the transfer pricing method applied to
be filed within 6 months of the corporate
income tax return being file.
The threshold applicable for disclosure of
such transactions has now been signifi-
cantly reduced from €400 million to €50
Copyright © Ferrieres & Co. All rights reserved Telephone: +33 (0) 1 42 94 29 33 Web: www.ferrieres.net Email: info@ferrieres.net

2. million under a law passed in Novem-
ber 2016 known as the Loi Sapin II.
ALLOWABLE INTEREST ON
SHARHOLDER LOANS
Each year the French Tax Administra-
tion publishes the annual rate of inter-
est that is the maximum deductible
rate for corporate income tax pur-
poses. For financial years ending 31
December 2016, the maximum allow-
able rate is 2.03% .
This deduction is before additional
allowance tests; namely (i) evaluation
of interest expense deduction under
thin capitalisation rules and (ii) inter-
est restrictions under Article 212 -1 of
the Code Général des Impôts where
interest charged by the lender is not
subject to corporate income tax in the
lender’s home state at least 25% of
their applicable corporate income tax
rate
DEPRECIATION ALLOWANCES
CHANGES
Accelerated depreciation for software
permitting tax deduction over 12
months is no longer be available for
new capital expenditure for account-
ing periods commencing 1 January
2017. Allowances are now allocated
in line with depreciation over the eco-
nomic useful life of the asset – either
2 or 3 years.
Tax deductions available on company
car depreciation have been modified
in favour of environmentally friendly
vehicles and against higher pollution
vehicles.
Depreciation calculated on the value
of company cars in excess of €18 300
has been non deductible for corporate
income tax purposes. This limit has
been increased to :
♦ €30 000 for vehicles with CO2
emissions < 20 g/ km
♦ €20 000 for vehicles with CO2
emissions > 20g/ km < 60 g/km
Tax deductions for depreciation on
higher polluting vehicles is in future
being limited to the first €9 900 of the
value of a company car as follows :
TAX AUDITS
NEW DESK TOP REVIEWS
French Tax Administration audits
concerning business taxation have
until now taken place « on site » how-
ever the FTA has now introduced
desk top tax audits to examine a busi-
ness’s accounting that will be carried
out directly from the tax office.
This new procedure is not classified
an official tax audit but an examina-
tion of the accounting – although the
tax payer does possess the same rights
as under a full tax audit and the FTA
cannot subsequently initiate a com-
plete tax audit covering the same peri-
ods and same taxes once a desk top
audit has been undertaken on a busi-
ness. The FTA can however deter-
mine that a full tax audit is necessary
at any time until closure of the desk
top audit.
When a business receives a notice of
an examination of its accounting, it is
required to submit its accounting re-
cords in required legal format
(Fichiers des Ecritures Comptables or
FEC) to the FTA within 15 days after
receipt of the notice.
International groups that do not use a
standard French software that permits
the immediate generation of the
Fichiers des Ecritures Comptables
should pay particular attention to en-
sure it is possible to respect this time-
table. If the accounting files are not
supplied to the FTA in the required
format within the specified 15 day
deadline, a €5 000 fine and a full on
site tax audit may be initiated.
IMPATRIATE REGIME
EXTENSION
In an attempt to tempt international
companies to relocate staff to France
post Brexit, the French government
has extended the period during which
employees relocating to France can
benefit from the impatriate regime.
The main benefits of this regime are :
♦ 30% of remuneration exempt
from income tax
♦ exemption for remuneration
relating to non French functions
for the same employer
♦ exoneration on 50% of invest-
ment income
♦ exemption from wealth tax on
foreign assets
For any employees moving to France
after 6 July 2016, these benefits are
now available until the end of the 8th
year following relocation (which com-
pares to 5 years previously).
SOCIAL CHARGES ON
FURNISHED PROPERTY
RENTALS
In a change reflecting the increasing
activity on internet platforms such as
AirBnB, Article 18 of the latest So-
cial Security Finance Act has intro-
duced obligatory registration with the
self employed / independent worker
social security authority (Régime So-
ciale des Indépendants or R.S.I) for
short term or holiday rentals where
receipts arising are in excess of €23
000. An election remains possible for
the general social security regime
where income remains under €82 000
per annum.
Additionally, from 1 January 2019
internet platforms will be required to
file a declaration detailing sources of
revenues received (Art 24 2016 Fi-
nance Act (Rectified)). This declara-
tion will thus identify owners paying
commissions to internet platforms
relating to property rentals.
WEALTH TAX CHANGES
Two changes set out in the 2016 Rec-
tified Finance Act have tightened re-
Newsletter March 2017
CO2
emissions
Vehicles purchased
or leased
155 g/km 01/01/17 - 31/12/17
150 g/km 01/01/18 - 31/12/18
140 g/km 01/01/19 - 31/12/19
135 g/km 01/01/20 - 31/12/20
130g/km From 01/01/21

3. million under a law passed in Novem-
ber 2016 known as the Loi Sapin II.
ALLOWABLE INTEREST ON
SHARHOLDER LOANS
Each year the French Tax Administra-
tion publishes the annual rate of inter-
est that is the maximum deductible
rate for corporate income tax pur-
poses. For financial years ending 31
December 2016, the maximum allow-
able rate is 2.03% .
This deduction is before additional
allowance tests; namely (i) evaluation
of interest expense deduction under
thin capitalisation rules and (ii) inter-
est restrictions under Article 212 -1 of
the Code Général des Impôts where
interest charged by the lender is not
subject to corporate income tax in the
lender’s home state at least 25% of
their applicable corporate income tax
rate
DEPRECIATION ALLOWANCES
CHANGES
Accelerated depreciation for software
permitting tax deduction over 12
months is no longer be available for
new capital expenditure for account-
ing periods commencing 1 January
2017. Allowances are now allocated
in line with depreciation over the eco-
nomic useful life of the asset – either
2 or 3 years.
Tax deductions available on company
car depreciation have been modified
in favour of environmentally friendly
vehicles and against higher pollution
vehicles.
Depreciation calculated on the value
of company cars in excess of €18 300
has been non deductible for corporate
income tax purposes. This limit has
been increased to :
♦ €30 000 for vehicles with CO2
emissions < 20 g/ km
♦ €20 000 for vehicles with CO2
emissions > 20g/ km < 60 g/km
Tax deductions for depreciation on
higher polluting vehicles is in future
being limited to the first €9 900 of the
value of a company car as follows :
TAX AUDITS
NEW DESK TOP REVIEWS
French Tax Administration audits
concerning business taxation have
until now taken place « on site » how-
ever the FTA has now introduced
desk top tax audits to examine a busi-
ness’s accounting that will be carried
out directly from the tax office.
This new procedure is not classified
an official tax audit but an examina-
tion of the accounting – although the
tax payer does possess the same rights
as under a full tax audit and the FTA
cannot subsequently initiate a com-
plete tax audit covering the same peri-
ods and same taxes once a desk top
audit has been undertaken on a busi-
ness. The FTA can however deter-
mine that a full tax audit is necessary
at any time until closure of the desk
top audit.
When a business receives a notice of
an examination of its accounting, it is
required to submit its accounting re-
cords in required legal format
(Fichiers des Ecritures Comptables or
FEC) to the FTA within 15 days after
receipt of the notice.
International groups that do not use a
standard French software that permits
the immediate generation of the
Fichiers des Ecritures Comptables
should pay particular attention to en-
sure it is possible to respect this time-
table. If the accounting files are not
supplied to the FTA in the required
format within the specified 15 day
deadline, a €5 000 fine and a full on
site tax audit may be initiated.
IMPATRIATE REGIME
EXTENSION
In an attempt to tempt international
companies to relocate staff to France
post Brexit, the French government
has extended the period during which
employees relocating to France can
benefit from the impatriate regime.
The main benefits of this regime are :
♦ 30% of remuneration exempt
from income tax
♦ exemption for remuneration
relating to non French functions
for the same employer
♦ exoneration on 50% of invest-
ment income
♦ exemption from wealth tax on
foreign assets
For any employees moving to France
after 6 July 2016, these benefits are
now available until the end of the 8th
year following relocation (which com-
pares to 5 years previously).
SOCIAL CHARGES ON
FURNISHED PROPERTY
RENTALS
In a change reflecting the increasing
activity on internet platforms such as
AirBnB, Article 18 of the latest So-
cial Security Finance Act has intro-
duced obligatory registration with the
self employed / independent worker
social security authority (Régime So-
ciale des Indépendants or R.S.I) for
short term or holiday rentals where
receipts arising are in excess of €23
000. An election remains possible for
the general social security regime
where income remains under €82 000
per annum.
Additionally, from 1 January 2019
internet platforms will be required to
file a declaration detailing sources of
revenues received (Art 24 2016 Fi-
nance Act (Rectified)). This declara-
tion will thus identify owners paying
commissions to internet platforms
relating to property rentals.
WEALTH TAX CHANGES
Two changes set out in the 2016 Rec-
tified Finance Act have tightened re-
Newsletter March 2017
CO2
emissions
Vehicles purchased
or leased
155 g/km 01/01/17 - 31/12/17
150 g/km 01/01/18 - 31/12/18
140 g/km 01/01/19 - 31/12/19
135 g/km 01/01/20 - 31/12/20
130g/km From 01/01/21