Corporation tax

Corporation tax is a tax, in principle payable annually, on all profits generated in France by companies and other legal entities.

It concerns about a third of French companies.

Legal entities may be liable to corporation tax:

  • either at the standard rate of 33⅓% for all their activities
  • or at certain reduced rates notably 15% for the first €38,120 of taxable profit of certain SME companies.

From 1st January 2017, the corporate tax rate is set to decrease from 33.33% to 28% for SMEs with turnover below €50 million, on the first €75,000 of taxable income, with this measure to be extended to all companies by 2020, irrespective of their size and profits.

A 3% corporate surtax, which comes on top of underlying corporation tax is owed on amounts distributed by French and foreign companies and organisations liable to corporation tax in France.

In addition, large-size corporation tax payers are liable to a social contribution equal to 3.3% of the tax assessed on their taxable profits at the standard rate (33⅓%) and at the reduced rates, minus relief that may not exceed €763,000 per twelve-month period.

A non-resident company is subject to corporation tax in France on income attributable to French business activity or to a French PE, as well as on income from real estate located in France.

French personal income tax

French personal income tax is in principle a comprehensive tax levied on an individual’s total income in a given year.

Unless otherwise provided, all income, regardless of origin, is aggregated to give an overall net income to which a single tax scale is applied.

The scale has progressive income bands from 0 to 45%. However, there are many provisions in the method for calculating income tax that allow taxation to be adjusted to personal circumstances.

Since 2013, investment income (dividends and similar income, revenue from fixed-income securities) is also subject to the progressive income tax scale.

Nevertheless, by way of exception, some income is still subject to proportional levies.

Personal income tax is assessed annually on a tax household’s taxable income in a given calendar year.

The following categories of income are liable to personal income tax:

  • business profits,
  • non-commercial profits,
  • agricultural profits,
  • income from property,
  • wages,
  • salaries,
  • pensions and annuities,
  • investment income and capital gains.

In principle, persons not domiciled in France must file an annual return reporting all their income if they have income from French sources or one or more homes in France.

The rules for income received by persons domiciled in France are the same in principle for income received by persons not domiciled in France.

However, specific arrangements exist notably, withholding tax is applied to some income from French sources received by persons not domiciled in France and in some cases the withholding may discharge the income tax liability partly or in full, meaning that progressive rates of tax are not applied to the income in question.

For further information on French direct taxes please click here