On 30 December 2020, the Government Officially published Finance Law for the year 2021. On 17 December 2020, the French Parliament approved the Finance Bill for 2021. The Act includes:

Corporate Income Tax

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

• The standard corporate income tax (CIT) rate for the 2021 financial year is 26.5% for companies with turnover less than EUR 250 million and 27.5% for large companies with turnover EUR 250 million or more. The withholding tax on dividends and royalties to non-resident companies is therefore reduced accordingly to 26.5%.
• The threshold for the small and medium enterprises (SMEs) is increased from EUR 7.63 million to EUR 10 million. So, taxpayers with annual turnover not in excess of EUR 10 million are subject to the 15% reduced corporate income tax rate. Again, a new tax credit for SMEs is introduced for expenses incurred between 1 October 2020 and 31 December 2021 for energy renovations of buildings or parts of buildings, which is equal to 30% of the costs.
• 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 Finance Act 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.

Personal income tax

The general personal income tax brackets are set as follows:

VAT

Several VAT measures are also provided in the Finance Act, 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.