France: Tax incentives of non-profit organisations

01 November 2014

In France, non-profit organisations (hereafter « NPOs ») are in full expansion. For the year 2012, the weight of a social and solid economy represented 10% of employment[1].

The use of public interest entities may benefit from various incentives in France thanks to tax attractive treatments. Under respect some conditions, NPOs may benefit from an exemption of corporate income tax (hereafter “CIT”), VAT and territorial economic contribution (hereafter “TEC”), all together denominated “Business Taxes”.

1. What types of NPOs are concerned

Common types of NPOs are:

  • Associations governed by the law of 1901;
  • Foundations of public utility;
  • Corporate foundations;
  • Religious congregations;
  • Trade unions; or
  • Work councils

2. The NPO favorable tax treatment

2.1  The NPO shall perform a non-profit activity

When NPO fills the three cumulative following conditions, its activity is considered as non-profit and exempted from business tax:

(i)    The NPO shall not carry out a profit-making activity. However, NPOs may carry out an accessory profit-making activity, provided that the turnover corresponding to the profit-making activity does not exceed €60,000.

(ii)  NPOs shall be administered on a non-profit-making basis. The non-profit-making feature exists even though the NPO pays salary to its executives. However, the following rules shall be observed:




Amount of the salary

Taxation of salaries


ü Salaries of ipso jure or facto executives

€1,084 gross per month in 2014 (3/4 of the French minimum wage)

Income tax of executive (category of non-commercial profits)

French tax Administration Tolerance

ü Associations and foundations with financing resources exceeded €200,000 on the average of the last three fiscal years ending

ü According to their own resources

ü Compliance with financial transparency

ü Payment from 1 to 3 executives

€9,0387 gross per month in 2014 (3 times the maximum amount of Social security)

Income tax of the executive (category of wages and salaries)


(iii) Its activity shall not compete with a business industry, or, the competition shall be performed under different conditions from those of the business sector.

(iv)The NPO shall not have privileged relationships with some companies.


2.2 Tax treatment of income received by NPOs

2.2.1 Corporate income tax rate

Profits generated within French territory are subject to French corporate income tax (CIT) at a standard rate of 33.33%. However, the effective CIT rate is:

  • 34.43% if the amount of the corporate tax is higher than €763,000;
  • 36.9% if the turnover exceeds €250m;
  • 38% if the corporate tax is higher than €763,000 and the turnover exceeds €250m.

These rates do not apply to NPOs which are, in principle, exempted from CIT.

However, some income perceived by a NPO is taxed at one of the following rates:




CIT rate

Accessory profit activity ≤ €60,000 € excluding VAT

ü Management of NPO shall be administered on a non-profit-making basis

ü Non-profit activities shall significantly remain preponderant

ü Income arising from profit activities shall not exceed the amount of €60,000 excluding VAT


Real estate income

ü Income from leasing of buildings or land (rents)

ü Real estate gains

24 %


Financial investment income

ü Products of non-negotiable debt securities, deposits, sureties and current accounts

ü Products from capitalisation bonds or contracts

ü Income from foreign securities (except dividends)

ü Advances, loans or payments received as partners of LLC


ü French or foreign dividends

ü Capital gains on securities

15 %


ü Income from bonds

ü Products of negotiable debt securities

ü Debt premium

ü Products from Mutual Fund Units or Securisation Fund Units

ü Pension funds

10 %

Income from financial activities and employee shareholding

ü Profit financial activities :

  • Active management of one or more subsidiaries

ü Employee shareholding:

  • Income from employee shareholding in a body subject to the tax regime of the partnerships performing a profit activity

33,1/3 %

Other income

ü Agricultural profits

24 %


2.2.2 VAT and tax on wages

NPOs exempted from VAT on theirs accessory profit activities may not deduct VAT on goods or services acquired under exempted transactions.  

Even though NPOs are not subject to VAT, NPOs can benefit from a deduction of €20,161 for tax on wages for the year 2014, if they employ less than 30 employees.




Tax on wages





Deduction of €20,161

Accessory profit activities ≤ €60,000 excluding VAT



≥ 30 employees




30 employees



Real estate transactions






Financial investment transactions







2.2.3 TEC

NPOs carrying out an accessory profit-making activity are also exempted to territorial economic tax.

NPOs may conduct lease or sublease activity of real property for commercial use while being exempted of territorial economic contribution:

  • Income of less than €100,000 for corporate real property corporate tax;
  • Income of less than €152,500 for contribution based on value added.

3. NPOs may perform under conditions profit-making activity while retaining tax-exempt status of Business Taxes

In the event, the NPO carries out a profit-making activity generating a turnover exceeding €60,000, the favorable tax treatment as explained above in paragraph 2 still may apply in the following case: 

  • Even if thresholds are exceeded, NPO may create a profit-making sector ; or
  • Contribute the profit-making activity to a company.

3.1 The NPO creates a sector corresponding to its profit-making activities

In the event, the NPO carries out both non-profit and profit-making activity, the turnover corresponding to these two activities shall be subject to the CIT standard rate.

To avoid this negative tax impact, a NPO would create another sector of activity for the purpose of Business Taxes. In such a case, non-profit-making turnover would remain exempt of Business Taxes as explained above in paragraph 2.

As a result, profit sector will be subject to Business Taxes as follows:

Profit-making Sector


ü Profit-making activity of NPO shall be severable from its non-profit making activity

ü Non-profit making activity of NPO remain significantly preponderant


Profits not exceeding €38,120

15 %

Profits exceeding €38,120

33,1/3 %

ü Social contribution

ü Exceptional contribution on CIT, if turnover exceeds €250 million

ü Annual minimum corporate income tax payment


ü VAT on profit making activities


ü Corporate real property tax, if incomes exceed €100,000

ü Contribution assessed on value added, if income exceed €152,300

Filing requirements

ü Form#2065 (profit making activity)

ü Form#2070 (real estate and investment income)


However, NPO should be compliant with accounting and tax obligations relating to business tax. This compliance implies additional cost for NPO.

3.2 The NPO contributes the profit-making activity to a company

NPO may as well contribute its profit-making activity within a separate corporate entity. The contribution may be realised to a new company or to an existing company.

If conditions are met, this transaction may benefit from the favorable tax regime for mergers provided by Articles 210A and subs. of the French Tax Code. Such a transaction allows preserving non-profit making from taxation.

The subsidiary would be subject to Business Taxes under common rules.

4. Use of NPOs internationally

As mentioned in paragraph 2 above, when a French NPO sells a real estate asset, the capital gains is subject to any taxation.

Does this exemption apply to foreign NPO selling a French real estate?

YES - A French case law[2] consider that NPOs having their head office located in another State member of the European Union or in a State member of the European Economic Area (Norway, Iceland or Liechtenstein) shall benefit from the same tax treatment as French NPOs.

Consequently, provided European NPOs meet the requirements for non-profit status (explained above), European NPO selling a real estate property in France escapes  the tax on gain because in the same situation a French NPO is not subject to tax on the gain deriving from this transaction by virtue of (i) the non-discriminatory clause contained in tax treaties and (ii) the free movement of capital.

In order to benefit from this exemption, the NPO will have to send a claim to the French Tax Authorities to evidence that the NPO fulfils the conditions mentioned above in paragraph 2 to be considered as a non-profit-making entity from a French tax perspective.  

5. Tax incentives for taxpayers

Individuals or companies giving money to NPOs may benefit from tax deductions on their individual income tax or CIT.  

Individuals may benefit from two tax incentives in France:

  • Release of individual income tax equal to 66% of the amount given to the NPO (capped at 20% of the taxable income);
  • Release of wealth tax equal to 75 % of the amount given to the NPO (capped at €50,000 per year i.e. an individual cannot give more than €66,666 per year.

If some conditions are met, the taxpayer may use a share of the gift to benefit from the individual income tax release and the other share to benefit from the wealth tax release.

Entities subject to CIT may obtain a release of CIT equal to 60% of the amount given to NPO (capped at 0.5% of the turnover).

All of these  tax deductions may be deferred over  the next five years when the taxpayer has not  used the entire amount of the tax deduction.

[1] Insee – Social Economy in 2012

[2] CE, October 27th, 2008, #313.135, Fondations Stichting Unilever Pensioenfonds Progress