Progressive reduction of the corporate tax rate

Progressive reduction of the corporate tax rate

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cs announced in the presidential campaign of President E. Macron Bercy just published and comment on the steps of the gradual reduction in the rate of corporation tax to bring it back to 2022 in the average of the rates at other EU Member States and other countries applying this tax.

Bercy commented on the reduction of the corporate tax rate and the consequent coordination measures.

The drop in corporate tax is a commitment of the President

In accordance with the provisions of article 84 of the 2018 budget law, the normal rate of corporation tax provided for in the second paragraph of I of Article 219-I.2 of the General Tax Code will be progressively decreased to 25% by 2022.

2018

  • Rate of 15% up to € 38,120 of taxable profits 
    The provisions of Article 219-Ib of the CGI provide that SMEs subject to corporation tax automatically benefit from a reduced corporate tax rate. 15% on the fraction of profits not exceeding € 38,120. This scheme is reserved for companies that have a turnover of less than € 7,630,000 and whose capital, fully paid up, is held for at least 75%, directly or indirectly, by natural persons.
  • Rate of 28% for the fraction of taxable profits between € 38,120 and € 500,000
  • Rate of 33.33% for the fraction of taxable profits exceeding 500.000 €

2019

  • 15% rate up to € 38,120 of taxable profits
  • Rate of 28% for the fraction of taxable profits between € 38,120 and € 500,000
  • Rate of 31% for the fraction of taxable profits exceeding 500,000 €

2020

  • 15% rate up to € 38,120 of taxable profits
  • Rate of 28% for the fraction of taxable profits exceeding € 38,120

2021

  • 15% rate up to € 38,120 of taxable profits
  • Rate of 26.5% for the fraction of taxable profits exceeding € 38,120

2022

  • 15% rate up to € 38,120 of taxable profits
  • Rate of 25% for the fraction of taxable profits exceeding € 38,120

Coordination measures needed

As part of the update of its base BOFIP-Tax on August 1, 2018, the tax administration has also specified the new terms of allocation of tax credits (BOI-IS-RICI-30-10- 20-10-20180801), and provided details on the calculation of the amount of the corporate income tax installments (BOI-IS-DECLA-20-10-20180801).

Lastly, it commented on the coordination measures necessary for the application of tax systems referring to the standard corporate income tax rate from Article 84 of the FL for 2018, concerning:

  • long-term capital losses on items in the taxable sector at 15%, 19% or 25%;
  • the limitation of financial charges in the event of low taxation or exemption from interest in the result of the related credit company;
  • the particular case of long-term net capital losses suffered by companies subject to income tax at the end of their business;
  • profits made by merchants of property and similar;
  • the levy provided for in Article 244a A of the aforesaid code on capital gains realized by non-residents (Article 244a A of that Code);
  • the tax regime of income distributed by French companies to non-residents.

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