If you’ve recently started a business in France, then you’ll need to file taxes under the corporate tax system (Impôts sur les Societiés or IS) or, if your business is small enough, the personal tax system (Impôts sur le Revenu or IR).The French tax system can be confusing for the novice (or even the experienced) business owner, which is why we wanted to tell you the most important things to know.
1. There’s a major tax reduction coming
Corporate tax will drop over a five-year period to 25%, thanks to a new bill, which makes for a more favourable business environment. It was 33.33% but has already dropped to 28% for businesses making below €500.000 and 31% for businesses making over that amount.
2. Your business type decides your corporate tax regime
There are threecorporatetaxregimes in France: Bénéfices Industriels et Commerciaux (BIC), Bénéfices non Commerciaux (BNC), and Bénéfices Acricole (BA). BIC relates to commercial manufacturing businesses, BNC deals with independent professionals, and BA is for agricultural businesses.
However, businesses with an annual turnover below €230.000 (BIC) or €76.300 (BNC) can be taxed under a simplified system (régime du réelsimplifié), where you detail income, expenditures, and apply French business tax to the net profit. Businesses with turnovers below €170.000 (BIC) or €70.000 (BNC) pay under the régime micro-entreprise, where you declare your turnover, are allocated a fixed allowance, and taxed on a fixed profit.
3. Taxes are normally spread out over a few months
French corporate tax is payable every quarter on the 15th of March, June, September, and December unless you’re a new company or paid less than €3.000 in the previous year.
However, it’s common to contact the French tax services and agree on a monthly payment, which spreads the cost and means that you don’t pay in one big hit, which would affect your monthly profit levels significantly.
A request does not mean it will be granted by the French tax authorities though. Their approval is often based on how you formulate your request, which is why it is recommended that you hire an English-speaking accountant in Francewho can cut through the legalese to make things easier for you.
4. When you file depends on your tax regime
Most business owners have to file within three months of the closing of their accounts or by April 30, but those who qualify for the micro regime have to file by May or June every year and pay by September or October.
Additionally, new businesses don’t have to file in their first year of trading but must file in the second year, including all accounts and figures since the start of business.
5. New businesses don’t have to pay the Contribution EconomiqueTerritoriale (CET)
The CET, which helps pay for services like the Chambers of Commerce, is based on the rateable value of the business property and the ‘value added’ each year by the business. It is payable in December but can be spread over two instalments. Businesses don’t have to payin their first year of trading and get a 50% reduction in their second year.
6. You might be able to choose whether to charge VAT
If your annual turnover is less than €33.200 (for service-based businesses) or €82.800 (for commercial activities, bars, restaurants, and accommodation), you don’t have to charge VAT in France (Taxe sur la ValeurAjoutée or TVA). However, you do have to state on your invoices that it is not applicable.
If VAT, which is set at 20%, is applicable, you’ll be given a 13-character VAT number that you have to write on all your invoices.
7. Business owners can reduce their personal income tax by 10%
The French income tax brackets in 2019 are:
- Less than €9.964: 0%
- €9.964–€27.519: 14%
- €27.519–€73.779: 30%
- €73.779–€156.244: 41%
- Over €156.244: 45%
Business owners can reduce their taxable income by deducting work-related expenses, social security contributions, interest on specific business loans, and contributions to French pensions.
This is only an overview but, hopefully, it has given you some idea about what to be aware of. Remember to seek advice about your unique situation from a professional.