France: Reduced corporate tax rate for SMEs; increased tax credit

France: Reduced corporate tax rate for SMEs

The French prime minister announced that the corporate income tax rate that applies for small and medium size enterprises (SMEs) would be reduced to 28% beginning 2017, and that there would be an increase of a tax credit available for “encouraging competitiveness and jobs” to 7% also effective beginning 2017.

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Corporate tax rate

Prime Minister Manuel Valls in an interview with the weekly newspaper L’Express announced that the corporate income tax rate for SMEs would decrease from 33⅓ % to 28%. The new 28% rate would apply “to a portion” of SMEs profits (currently, it is not known which portion of profits would be subject to the reduced tax rate). 

Currently, gross revenue of SMEs under €7.63 million benefits from a reduced corporate income tax rate of 15%. This reduced rate applies only to the portion of taxable income that does not exceed €38,120. Beyond this amount, the standard corporate income tax rate of 33⅓ % applies.

Tax credit

Regarding the tax credit for encouraging competitiveness and jobs, the amount of the credit is based on the gross amount of salaries (as defined for the social contributions calculations) below the threshold equal to two and one-half (2.5) times the minimum wage in France (the maximum basis being approximately €3,500 per month). If that threshold is exceeded, the total amount of the salary paid is excluded from the competitiveness tax credit basis. 

The prime minister announced that this tax credit—currently allowed at 6% of eligible expenses—would be increased to 7% as from 1 January 2017.

 

For more information, contact a tax professional with KPMG’s French tax center in New York or with Fidal* in Paris:

Patrick Seroin | KPMG | + 1 (212) 954-2523 | patrickseroin@kpmg.com

Gilles Galinier-Warrain | +33 (0)155 68 16 54 | gilles.galinier-warrain@fidal.com  

Olivier Ferrari | +33 (0)1 55 68 14 76 | olivier.ferrari@fidal.com 

Olivier Schmitt | +33 (0)1 55 68 15 92 | olivier.schmitt@fidal.com

 

* Fidal is a French law firm that is independent from KPMG and its member firms.

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