On 28 September 2020, the Council of Ministers adopted the French Budget Bill for 2021 or Finance Bill 2021. The draft Bill also includes the recovery plan to restore the economy following the coronavirus pandemic. French Parliamentary discussions on the Bill should begin on 12 October and are expected to be finalized by the end of December 2020 with a vote and enactment. The measures include:

Corporate Income Tax

In the context of the Covid-19 economic crisis, a temporary neutralization of the tax consequences of such revaluation is being proposed along those conditions:

• For depreciable assets, it would be possible to spread of the revaluation differences over a period of 5 or 15 years depending on the nature of the assets. Depreciation would be calculated using the revalued basis as from the fiscal year following that of the revaluation.
• Any disposal of the asset would trigger the immediate taxation of the fraction of the gain which has not yet been recaptured in the taxable income at the time of the sale.
• For non-depreciable assets, the proposed neutralization would consist in the deferral of the revaluation gains until the disposal of these assets.

This tax treatment is available for the reevaluation realized in the FY ending on or after 31 December 2020 and until 31 December 2022.

Capital gains

Under a sale and lease-back transaction, a company that owns a real estate property can dispose of sale transaction and continue to use it under a lease arrangement. According to the provisions of the Draft Finance Bill for 2021, such sale and lease back arrangements would become tax neutral for the company disposing of its real estate property since the latter would be allowed to spread the capital gain realized over the period of the lease agreement.

R&D Tax credit

French tax law provides for a 30% R&D tax credit on qualifying research expenses up to €100M and a 5% credit above this limit if certain criteria are met. The Bill would also repeal the possibility to file administrative ruling applications regarding the R&D tax credit to agencies in charge of supporting innovation. As of 1st January 2021, companies should only apply for an administrative ruling regarding the R&D tax credit with the FTA.

VAT

Several VAT measures are also provided in the Finance Bill, including a postponement to 1 July 2021 for the implementation of new VAT rules on e-commerce sales to comply with EU law that were introduced as part of the Finance Law for 2020.