On 20 December 2018, the French Parliament approved the Finance Bill for 2019.
Tax measures taken under the Finance Bill 2019:
- The finance bill approves interest deductibility limitation rules in effort to comply with the European Union (EU) Anti-Tax Avoidance Directive (ATAD). Deductible interest would now be limited to 30% of earnings before interest, taxes, depreciation and amortization (EBITDA), or EUR 3 million, whichever amount is higher. This adjusted EBITDA will be calculated from the tax result after the adjustments mentioned, thus including extraordinary gains and expenses. 75% of the net financial expense exceeding the regular threshold will still be tax deductible provided that the equity-to-asset ratio of the company is at least equal to, or is not lower, by more than two percentage points than the equity-to-asset ratio of the consolidated group to which it belongs. Note that this safe harbor rule does not apply in case of thin capitalization. The bill also repealed the existing 25% general reduction and the thin-capitalization rules. Taxpayers can carry forward non-deducted interest for an unlimited time; or can carry forward unused interest capacity for five years.
- Starting in 2019, all businesses will be taxed at 28% on their first €500,000 of earnings and 31% above this level.
