Article 17 of the second 2012 Amending Finance Act provides that, for fiscal years ended as of July 4, 2012, any assistance that is financial in nature (waivers of debt, subsidies, no-interest loans, etc.) will be disallowed as expenses that are deductible from income taxes on profits of companies which granted them.

However, this exclusion will not apply to waivers of debt and subsidies granted as part of commercial relationships or to those granted to companies that are subject to collective insolvency proceedings:  these subsidies will continue to be deductible from the taxable income of the company that granted it, provided that it complies with the general rules for deductibility of costs and expenses.

As a reminder, until this reform, waivers of debt and subsidies granted to a subsidiary were a deductible expense for the parent company that granted it, at the fraction of the amount the effect of which was to increase the value of the subsidiary’s shares.  The subsidy was then accepted as a deductible expense from the parent company’s taxable income at:

  • the fraction of the amount corresponding to the subsidiary’s net negative worth;
  • the fraction corresponding to its net negative worth following the subsidy payment, in the proportion of the subsidiary's share capital held by other companies.

Henceforth, regardless of the amount of the subsidiary’s net negative worth, this assistance will no longer be tax deductible.

An adjustment mechanism is used to calculate the contribution on corporate added value (CVAE) in order to no longer include financial subsidies for calculating the added value