Readers may remember that the 2017 Finance Act set out a timetable for the reduction of the standard corporate income tax (CIT) rate, which was subsequently amended by the 2018 Finance Act.
The timetable set by the current law is as follows:
- for financial years beginning in 2018, the rate is set at 28% for the fraction of profits up to €500,000 and 331/3% above that level;
- for financial years beginning in 2019, it is set at 28% for the fraction of profits up to €500,000 and 31% above that level,
- for financial years beginning in 2020, it is 28% on all profits;
- for financial years beginning in 2021, it is 26.5%,
- and for financial years beginning on 1 January 2022, it is reduced to 25%.
However, this timetable is likely to change. The Prime Minister announced in December 2018 that for the largest corporations and groups (those whose turnovers reach at least € 250 millions) the 331/3% rate will not decrease to 31% in 2019 in order to generate additional revenue of around €1.8 billion
Since this change has so far only been subject to an announcement, its implementing provisions still need to be specified. According to the latest information, it is likely to be included in a supplementary Finance Bill expected in May or June 2019.
This announcement, still unconfirmed, raises issues. When finalising the accounting records and the financial documents for the 2018 financial year, some future transactions will need to be recorded with an indication of the deferred tax (or tax saving) applicable to the transaction. Yet under both French (CRC 99-02) and IFRS (IAS 12) standards, deferred taxes must be valued using the tax rate and tax rules in force at the end of the year, which will be applicable when the transaction is completed. Therefore, in this particular case, the changes to the timetable will obviously not be taken into account at the end of the 2018 financial year.