On 30 December 2023, France released its Finance Law for 2024 (Law no. 2023-1322) in the Official Gazette, along with the Constitutional Court’s review, affirming the constitutionality of key tax measures. A major highlight is the implementation of Council Directive (EU) 2022/2523 for Pillar 2 global minimum tax, featuring the Pillar 2 Income Inclusion Rule (IIR) and the Undertaxed Payment/Profit Rule (UTPR), ensuring a 15% minimum tax for MNE groups. The law introduces a Qualified Domestic Minimum Top-Up Tax (QDMTT) for in-scope groups, applicable from 31 December 2023, with UTPR effective from 31 December 2024.
Additional measures include indexed individual income tax brackets, a new tax credit for “green industry” investments, a phased elimination of the business value-added contribution until 2027, and the transposition of VAT directives.
The Finance Law includes measures aimed at enhancing the tax administration’s ability to identify and address the misuse of transfer pricing regulations. These measures entail:
- Lowering the threshold for mandatory transfer pricing documentation preparation and submission during audits, from EUR 400 million to EUR 150 million in annual turnover or gross assets.
- Increasing the minimum penalties for incomplete or missing documentation from EUR 10,000 to EUR 50,000, while maximum penalties remain unchanged.
- Introducing a third means of proof for the tax administration concerning the burden of proof rules. If the method used for determining transfer prices deviates from the documented method (local file), there’s a presumption of profit transfer abroad, shifting the burden of proof onto the taxpayer.
The Finance Law also postpones the initial mandatory e-invoicing and e-reporting requirements from 2024 to 2026, with a phased timeline for different business categories.
Effective from 1 January 2024, the Finance Law for 2024 reflects France’s commitment to a resilient fiscal framework, environmental sustainability, and addressing contemporary challenges.
