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This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
 Location driven incentives
Incentives for takeovers of a bankrupted company
Joining a "CGA"
Tax credit is allowed for cash contribution to the capital of “SME”
Capital losses can be offset against other income
R&D driven SME called " JEI"
SUIR (Venture company)
 Location driven incentives
Should certain conditions be met, location of newly created enterprises located in specific areas designed by decree e.g. Dunkerque), several places in Corsica and in overseas departments benefit from tax holidays. (to know more about this subject see location).
These tax incentives are granted for income tax, corporate tax, business tax, real estate tax, registration duties and may also be granted for social taxes.
The specific areas list is available at the tax departmental directorate, or at a department of the Ministry of social affairs reachable at the following address and phone numbers:
Ministère des affaires sociales
194, av. du Président Wilson
93217 La Plaine Saint Denis
Téléphone +33 1 49 17 46 46
Télécopie +33 1 55 93 17 94
Incentives for takeovers of a bankrupted company
Some companies formed to acquire ailing firms benefited from a 24-month exemption of corporate income tax, minimum alternative tax and local taxes (§ 44 septies CGI). By a decision dated December 16, 2003, the European Commission qualified this provision as a prohibited state aid. Commission asked France to withdraw this provision and seek the refund of the aid granted. As this stage the recovery period is uncertain (3 last years or 10 last years). The validity of a claim against the State for indemnification is also an open question.
WARNING: In order to protect their rights the companies benefiting of a tax cut according to section 44 septies of the French tax code higher than 100 000 euros should file the appropriate ruling as soon as possible.
Joining a "CGA"
CGA are associations whose role is to provide management and accounting services, assistance in tax filing obligations to businesses. Tax authorities are supervising the provided services. All enterprises whatever their tax regime have the right to join a CGA.
When joining a CGA, self employed entrepreneurs taxable according the regular tax regime benefit from a 20% standard deduction on their taxable result up to 117 900 euros for FY 2004. This tax incentive is only applicable to self employed entrepreneurs.
Tax credit is allowed for cash contribution to the capital of small or medium size businesses “SME”
According to EU definition, SMEs are companies with less than 250 employees, a yearly balance sheet not exceeding 40 millions euros or annual sales not exceeding 40 millions euros, and not more than 25% owned by other companies not meeting the definition of a SME.
When conditions are met, the subscription to the capital of a SME generates a personal income tax credit which may cumulate with a wealth tax exemption.
Capital losses can be offset against other income
Individuals who make an equity infusion in cash in a newly created company which is bankrupted within 8 years after its creation, the capital subscribers are allowed to deduct for income tax purposes the loss incurred up to a maximum amount of 30 000 euros (single) or 60 000 euros (couple). These ceiling are applicable since January 1st, 2003.
It is not possible to cumulate this tax deduction with other similar tax incentives e.g. tax credit for cash contribution to the capital of small or medium size businesses (See § above). Mechanisms exist to equalize tax if successive elections are made over the time.
R&D driven SME called "JEI"
R&D DRIVEN SME "JEI" - SME created between 1/1/2004 and 12/31/2013 or created less than 8 years ago as of 1/1/2004 with R&D expenses representing at least 15% of their costs are, under certain conditions, exempt of income tax, minimum income tax, property tax and municipal tax up to 100 000 euros per 3 years period. In addition and subject to certain conditions, capital gains made by individual shareholders on the sale of the shares of JEI are tax exempt. Last specific categories of employees are exempt fromof social taxes.
The companies which want to check if they are entitled to the benefit from the JEI regime may contact at any time their local tax authorities in order to get a ruling. Local revenue must answer within a 4-month period. Beyond this period, a lack of answer is treated as an approval.
French tax authorities confirmed that former employees continuing independently a R&D project which was discontinued by their former employer may benefit of the JEI.
SUIR (Venture company)
See Private assets.
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