FINANCE ACT FOR 2015

The Finance Act for 2015 was adopted by the French Parliament on December 18th 2014 and was published in the French Official Journal on December 30th 2014.

By way of decision n°2014-707 DC of 29th December, 2014, the Constitutional Council (Conseil Constitutionnel) censured several provisions of the law.

Transfer pricing

Sanction for inadequate transfer pricing documentation

The upper limit of the payable fine in case of inadequate transfer pricing documentation is increased.

The minimum fine remains fixed at €10,000 and can reach the higher of the following amounts :

  • 0.5% of amount of transactions concerned by documentation not made available to tax authorities after formal notice.
  • 5% of tax reassessment under Article 57 of the French Tax Code and in relation with transactions subject to documentation requirements.

This fine applies to tax controls for which notice of Assessment is sent from January 1st 2015.

Tax credit for competitiveness and employment (CICE)

Increase in the CICE rate in French overseas departments and strengthening  follow-up of use

  • The CICE rate with respect to remuneration paid to employees working in companies located in French overseas departments is increased from 6% to 7.5% for remuneration paid in 2015 and to 9% for those paid since January 1st 2016.
  • Information relating to the use of tax credit has to be attached in the form of literary description to the balance or under a note to accounts. This measure applies to companies subject to income tax from income tax payable in respect of the year 2014 and for companies subject to corporate tax from corporate tax payable in relation to the tax years ended December 31st 2014

Tax credits

Research tax credit in French overseas departments

  • For research and innovation costs from January 1st 2015 by companies located in French overseas departments, the rate of tax credit is increased from 30% to 50% relating to part of eligible costs not exceeding €100m. It remains at 5% above this threshold.
  • The rate is increased from 20% to 40% for SME innovation costs.

Video games tax credit

  • The last adjustments of video games tax credit shall enter into force from the date taking into account the authorisation of European Commission.

Direct local taxes

Increase of rental values

  • Coefficients of flat-rate increase of property rental values for determining direct local taxes in 2015 are set at 1.009 for all buildings and unbuilt lands, the same as last year.

Additional tax in Paris area

  • A special tax in addition to property tax and company real estate contribution is created in favour of legal persons or individuals subject to property tax on buildings and/or subject to company real estate contribution in Paris area. Beneficiaries of a temporary or permanent exemption of property tax on buildings and of company real estate contribution are also exempt from this additional tax.

Miscellaneous tax measures

Business tax-exemption

  • The benefit of business tax-exemption for associations and other not-for-profit organizations regarding secondary for-profit activities is increased from €60,000 to €60,540 on income collected in 2014 with regard to corporate tax and from taxations established in 2015 with regard to corporate property tax. Relating to VAT, the threshold applies to secondary lucrative profits collected since January 1st 2015.Insurance premium tax
  • Legal protection insurances are taxed at a specific rate of 11.6% compared to 9% previously, for premiums and contributions due since January 1st 2015.

AMENDING FINANCE ACT FOR 2014

The Amending Finance act for 2014 was published in the French Official Journal on December 30th 2014.

By way of decision n°2014-708 DC of 29th December, 2014, the Constitutional Council (Conseil Constitutionnel) censured several provisions of the law.

Tax consolidation regime

  • Tax consolidation regime is amended to bring the French law in compliance with European law. It is now possible to create “horizontal” tax consolidation, i.e. between French sister companies, subsidiaries of a company based in a Member State of the EU, in Iceland, in Liechtenstein or in Norway. This measure applies from tax years ended December 31st 2014.

Parent-subsidiary regime

  • Parent-subsidiary regime is limited to remove the risk of double non-taxation of profits especially in relation to instruments called hybrids. Using parent-subsidiary regime is excluded for incomes from corporate securities, to the extent that distributed profits are deductible from the tax income of this company. This measure follows the European Directive of July 8th 2014 which requires Member States to tax profits distributed by a subsidiary from a Member State insofar as such profits are deductible from this subsidiary.

Tax credits

Tax credit for creation of phonogram production

  • The tax credit for creation of phonogram production is developed in order to take into account remuneration of managers taking part in creations included in the tax credit base for SMEs.

Cinema tax credit

  • The cinema tax credit rate for cinematographic and audiovisual production expenses is increased from 20% to 25% relating to animation works and to 30% relating to cinematographic works with a low budget. This measure applies to tax credits calculated for fiscal years beginning on or after January 1st 2016. The tax credit for executive production of foreign works is increased from 20% to 30%.

Combating tax evasion

  • A regularisation process is opened to companies that have been the subject of a tax audit leading to adjustments relating to profits transferred abroad under Article 57 of the French Tax Code or relating to payments to countries with a preferential tax regime. When adjustments are determined as distributed incomes to a related company, the company taxpayer can avoid paying the withholding on condition it agrees to the adjustments and penalties on company income tax and to repatriate these distributed incomes within 2 months.