France Tax alert - Main provisions of the Finance Bill for 2013 – Company taxation

05 October 2012

Laurence Clot, Rébecca Feliman, Vaea Pery

Warning – this news alert is based on the Draft Finance Bill in its present status, and subjected to important modifications

Company taxation

Disallowance of part of the financial charges

It is being proposed to implement a ceiling on the tax deductible part of net financial charges. Only 85% of these net financial expenses would be tax deductible for financial years 2012 and 2013, reduced to 75% as from 2014.

For companies member of a tax consolidation, this ceiling would apply solely to financial charges arising from operations made with companies outside the group.

For the protection of small and medium enterprises, the measure would not be applicable where the overall amount of net financial charges is lower than 3 million euros.

Calculation of the proportionate share of costs and charges (“quote-part de frais et charges – QPFC”) on capital gains from share transfers

Currently, long term capital gains realized by companies upon the sale of shares are exempt from corporate income tax (CIT), subject to the add-back of a QPFC equal to 10% of the financial year’s net capital gains.

The Finance Bill provides for a limitation of this tax incentive (so-called « Niche Copé ») by taking into account for the calculation of the QPFC the gross income on capital gains, with no offset of capital losses realized during the same financial year, increasing said QPFC.

This new measure should apply to capital gains on disposals made during financial years ended as from December 31, 2012.

Hardening of the use of tax losses carried-forward for companies subject to corporate income tax (CIT)

In the wake of the Amended Finance Bills for 2011, it is being proposed to lower the ceiling for offsetting tax losses carried-forward. 

Currently, the amount of tax losses which can be offset against the taxable income of a given financial year is capped to 1 million Euros increased by an amount of 60% of the taxable income exceeding this first limit. After the reform, the new rate would be reduced to 50%.

However, the portion of non offsettable tax losses would still be indefinitely carried forward, but applying the same limit in use as described above.

These new measures should apply as from financial years ended December 31, 2012.

Modification of the instalment regime of CIT for large companies

The new measures concern both the threshold of turnover triggering the payment of the last instalment on CIT (so-called “fifth instalment”) and its calculation.

It is being proposed to reduce the threshold of turnover triggering the payment of the fifth instalment to 250 millions euros (instead of 500 millions euros currently). 

Moreover, regarding the calculation of this last instalment, the additional amount payable, in addition to instalments already paid, would be increased to :

  • 75% (instead of 66%) for companies with a turnover between 50 millions euros and 1 billion euros ;

  • 85% (instead of 80%) for companies with a turnover between 1 and 5 billions euros ;

  • 95% (instead of 90%) for companies with a turnover exceeding 5 billions euros.

This measure should enter into force as from January 1st, 2013.

Enlargement of the research and development (R&D) tax credit for small and medium-sized enterprises (SME)

The Finance Bill plans to extend the perimeter of expenses eligible to the R&D tax credit in favour of SME, and also to strengthen its legal certainty.

The new measure would extend the R&D tax credit regime to innovation expenditures in support of R&D carried out by SME’s with regard to activities related to the design of new prototypes or pilot plans of the same nature. The newly eligible expenses would be taken into consideration in the limit 400 000 € per year, and give right to a R&D tax credit calculated at the 20% rate.

This measure would be partly financed by the cancellation of the increased rates of R&D tax credit granted to companies for the first two years of the use of that regime.

Furthermore, the legal certainty of the R&D tax regime should be strengthened by allowing companies to claim for a tax ruling even in the case where a R&D project has already started.

Taxation of amounts booked in the capitalization reserve of insurance companies

The Finance Bill for 2010 has created an exceptional contribution of 10% on capitalization reserve of insurance companies. The recapture of amounts booked in the capitalization reserve is not taxable.

It is being proposed to create an additional contribution of 7% on the same basis, or if lower, on the amount of capitalization reserve recorded at the opening of the financial year at the date of the publication of the law. This new tax should not be tax deductible.

The cumulative amount of the exceptional tax of 10% and of the additional tax of 7% should be capped to 5% of the net equity, capitalization reserve included.

This contribution should be due at the end of the undergoing financial year at the date of the publication of the law and should be collected and controlled like value added tax.

General Tax on polluting activities (GTPA) “Air”

The reform of the GTPA “Air” aims at strengthening the deterrent effect of the tax on polluting behaviours for the benefit of the environment and public health on the basis of the “polluter-pays” principle. It also intends to comply ensure compliance of French law with the European regulation resulting from the European directive 2008/50/EC of the European Parliament and of the Council of May 21, 2008.

It is being proposed to extend the scope of the tax and to increase its rate. Thus it is planned :

  • to extend the GTPA to five new polluting substances emitted in air : benzene, arsenic, selenium, mercury,  polycyclic aromatic hydrocarbons ;

  • to triple the rate into force in 2012 on emissions of sulphur oxides, emissions of non-methane hydrocarbons, solvents and other volatile organic compounds and emissions of total dust in suspension ;

  • to lower the threshold of submission to the GTPA on emission of total dust in suspension..


Should you have any additional question please contact :

Laurence Clot, Avocat Associée, Fiscalité – Attorney at law Partner, Tax

Rébecca Feliman, Avocat, Fiscalité - Attorney at law, Tax

Vaea Pery, Avocat, Fiscalité - Attorney at law, Tax

Anton Chyrkov, Avocat, Fiscalité - Attorney at law, Tax

Jenna Scaglia, Avocat, Fiscalité - Attorney at law, Tax