The draft of the French budget law for 2018, currently under discussion in the National Assembly, and the bill on financing social security, also under debate, include many measures affecting companies.
Read the evolutions about :
- French Budget Changes
- Social Security Financing
Proposed 2018 French Budget Changes
Corporate Income Tax Reduced
The tax law for 2017 had projected a gradual lowering of the corporate tax rate to 28% by 2020. The new government goes further and proposes a gradual lowering of the rate to 25% according to the following timetable:
– For fiscal years beginning in 2018, the rates of the finance law for 2017 would be applied, ie 28% up to 500,000 euros in profits and 33 1/3% beyond
– For subsequent years, the rates would be as follows:
Elimination of the 3% contribution on Distributed Income
This action comes in a very particular context since the Constitutional Council has just recently declared this tax unconstitutional and therefore repealed it as a whole from October 6, 2017, the date of its decision.
Companies that paid this contribution in 2015 and / or 2016 have the opportunity to file a claim for reimbursement by 31st December 2017 and 31st December 2018 respectively.
Salary Taxes : 20% rate to be eliminated
For wages paid from 1 January 2018, the increased rate of 20% applied to the fraction of wages exceeding 152,279 euros would be eliminated.
Corporate Value Added Tax (CVAE): Application of a group rate, even in the absence of fiscal integration (Tax pooling Group)
For the CVAT due for 2018, the rate used to determine the percentage of tax will be calculated on the basis of a consolidated turnover.
The application of a “group rate” will not only concern companies that are part of a tax consolidation group, but also those that satisfy the conditions for holding capital to be part of it.
Competitiveness and Employment Tax (CICE) : gradual elimination
The Credit (CICE) would be reduced in 2018 from 7% to 6%, and then abolished the following year.
In fact, it is expected that this tax advantage will be replaced as of 2019 by a reduction in social security contributions.
Proposed 2018 Social Security Financing
CICE reductions offset by lower Social Security charges
The competitiveness and employment tax credit (CICE) and the wage tax credit (CITS) would be abolished as of 2019 and replaced by a reduction in social security contributions. This reduction in charges will include two components:
Elimination of six points of social security contributions on wages less than 2.5 times the SMIC (minimum wage),
Broadening the base of the general reduction of employer contributions applied to wages lower than 1.6 times the SMIC to unemployment insurance and supplementary pension contributions.
Increased Scale of Vehicle Taxes (TVS)
As a reminder, the reporting period and the date of payment of the TVS have been substantially modified. As of in 2018, the tax period will now correspond to the calendar year.
As a transitional measure, companies should pay the tax due for the period of October 1, 2016 to December 31, 2017 in January 2018.
It is also planned to increase the scale of the TVS for vehicles taxed according to CO2 emissions and to adjust its “air” component with a modification of the installments per year. The objective of this increase is to encourage companies to use electric or hybrid vehicles.
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