France’s economic stimulus package encompasses several tax measures, the purposes of which – as far as companies are concerned – are mainly to help those facing financial difficulties and to sustain and develop investment.
Measures taken to improve financial situations
The Amended Finance Act 2008 (30 December 2008) includes several temporary mechanisms allowing immediate refunds, which can be summarised as follows:
- companies can obtain an immediate refund of the tax credit for R&D expenses incurred for tax years 2005, 2006, 2007 and in certain cases 2008 (instead of using this credit to pay corporate income tax or getting its reimbursement after a three-year-period);
- companies closing their financial year before 30 September 2008 may request the immediate refund of corporate income tax if quarterly instalments they have paid exceed the amount of corporate income tax computed for the year (instead of waiting for the final determination of the corporate income tax, i.e. almost 100 days after financial year ends);
- companies may request an immediate refund of their carry back receivables/losses (instead of using this credit to pay corporate income tax or getting its reimbursement after a five-year-period).
Some permanent measures have also been implemented pursuant to the stimulus package:
- qualifying small and medium-sized enterprises may temporarily take into account tax losses incurred by their foreign branches or subsidiaries (when directly holding at least 95%) in determining their income taxable in France. This cash flow advantage is however only temporary as the tax losses have to be recaptured when the foreign branch/subsidiary returns to a profitable situation, and the excess (if any) is otherwise recaptured in the fifth fiscal year following the initial offset;
- VAT credit refunds may be requested on a monthly basis (instead of a quarterly basis); and
- a process related to the request (and granting) of deferred payment conditions for tax debts has been legally set up.
The Amended Finance Act 2009 (20 April 2009) also provides for a temporary mechanism sustaining debt buy-back operations. In principle, when a French company buys back its debt, the positive difference between the purchase price and the face value of the debt is considered as taxable income. For debt buy-back operations made before 31 December 2010, the taxation of such income may, under some conditions, be spread over the year of the operation plus a five-year-period. This is subject, in particular, to the conditions that during the financial year of the buy-back operation, the share capital of the French company increases whereas the average mid-term and long-term debt of the company decreases.
Measures to sustain and develop investment
Measures have been taken in order to sustain investments made by companies and to favour economic activities.
- companies may benefit from an accelerated amortisation for investments made or acquired between 23 October 2008 and 31 December 2009;
- companies are relieved permanently from business tax for investments made or acquired between 23 October 2008 and 31 December 2009 (i.e. they will not be included in the tax base for the term of the investment). Companies for which business tax is capped may obtain a relief corresponding to 3.5% of the depreciation of such investments.
Additionally, measures (such as tax credits, non-remunerated loans or a low VAT rate) have been voted for individuals in order to boost certain sectors (such as real estate, construction, etc).