The French government on November 2, 2017 announced details of an “exceptional surcharges” to corporate income tax that would be intended at partly offsetting an estimated €10 billion in lost revenue as a result of a decision of the French Constitutional Court that held the 3% tax on distributions was unconstitutional.
The proposed surcharges are expected to raise approximately €5 billion in revenue.
Proposal for surcharges
The proposed surcharges would apply to French companies subject to corporate tax, and having gross revenue exceeding €1 billion. For French corporate tax groups, the €1 billion threshold would be applied at the level of the French tax group. It is anticipated that at present, approximately 320 corporate groups could be subject to the surcharge measures.
- The surcharges would be imposed on the amount of corporate income tax due on the results of financial years closed between 31 December 2017 and 30 December 2018.
- The “exceptional contribution” amounts would equal 15% of the gross amount of corporate tax owed by the taxpayer, before being offset by any tax credit or tax reductions.
- Taxpayers with revenue (as defined above) exceeding €3 billion would be subject to an “additional contribution” equal to 15% of their corporate tax liability, again before taking into consideration any offsets of tax credits or tax reductions. In other words, these taxpayers would be subject to a total surcharge of 30% of their gross corporate tax liability.
With the surcharges, the overall maximum rate of corporate tax could be roughly (taking into account the 3.3% existing surcharge that would be expected to apply to most of these taxpayers) for the financial years closed between 31 December 2017 and 30 December 2018, as follows:
- 39.43% for taxpayers only subject to the “exceptional contribution”
- 44.43% for taxpayers subject to both the “exceptional” and additional contributions
Tax credits or reductions, as well as tax receivables of any nature, would not be allowed as offsets against the exceptional or additional contributions. Both contributions would be payable at the time for paying the balance of the corporate income tax. However, an installment or estimated payment equal to 95% of both contributions, based on an estimate of the amounts due, would be payable at the same time as the last payment of the corporate income tax installment and, for taxpayers with a financial year ending on 31 December 2017, the payment would be due on or before 20 December 2017. Interest for late payments would generally be due if the installment was underestimated by at least 20% and was at least €1.6 million.
Legislative process
The proposal is expected to be submitted to the French Parliament so as to be considered and voted on in the next few weeks. Thus, payment of the installment to these surcharges would need to be made according to the dates mentioned above.
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