With the aim of creating a more business friendly environment, the French Government is planning to remove the competitiveness and employment (CICE) tax credit and reduce social security contributions. As an approach on this, the CICE tax credit will be converted into a reduction in payroll charges beginning on 1 January 2019.
A list of jurisdictions that have introduced Country-by-Country reporting requirements and have concluded a competent authority agreement on the automatic exchange of CbC reports with France was published in the French Official Journal on 8 July 2017.
For tax years commencing on or after 1 January 2016, all EU Member States and Australia, Bermuda, Brazil, Canada, Chile, China, Guernsey, Indonesia, Jersey, Mexico, New Zealand, Norway, South Africa and South Korea are included in the list. For tax years commencing on or after 1 April 2016, the list also includes India and Japan.
French constituent entities of foreign MNE groups whose UPE is tax resident in a country with which France has concluded a competent authority agreement on the automatic exchange of CbC reports are not subject to local filing in France. Otherwise, any French constituent entity of a foreign MNE group whose UPE is not tax resident in a country included in the list may be required to file a CbC report in France.
According to a statement by the Swiss Federal Council, Switzerland and France have resolved a number of questions concerning the exchange of tax data. The statement confirmed that the authorities had succeeded in agreeing on common solutions.
The Federal Council stated that Switzerland and France are currently in a position to comply with information exchange on request in all pending and subsequent cases, in line with the OECD standard.
On 4 July 2017, the Prime Minister of France confirmed in his opening speech to the National Assembly that the Government would cut the corporate tax from 33 percent to 25 percent by 2022 with the hope of attracting Businesses so that they set up and develop on France rather than any other country. However, other proposed tax measures will be delayed.
The newly elected Prime Minister of France delayed the implementation of withholding tax further by one year, which means this will now enter into force on 1 January 2019.
However, the decision will be confirmed by formal vote of the French Parliament which is expected to take place after the election of the new Parliament in June 2017. After the decision becomes confirmed the law will appear in the amended Finance bills for 2017 and 2018.
In France, companies subject to Corporate Income Tax (CIT) are required to pay an additional CIT contribution of 3% on the distributed profits according to article 235 ter ZCA of the French general tax law.
But, the Court of Justice of the European Union (CJEU) issued a judgment on 17 May 2017, ruling that the 3% contribution on distributed profits is not compatible with article 4-1 of the European Union (EU) Parent-Subsidiary Directive (PSD) when the parent company makes the redistribution of the dividends received from its subsidiaries.
These decisions provide an additional opportunity to claim refunds of the 3% tax paid before December 31, 2016, by French companies at least 95%-owned by MNEs that are subject to CIT or by French companies on redistribution of dividends received from their EU subsidiaries subject to CIT.
The ECJ’s decision (an anticipated development) is important in disputes relating to the 3% contribution, but is only one step. The litigation likely will continue on the basis of constitutional law issues.
French newly elected president has committed to reduce the corporate tax rate from current rate of 33.3% to 25% with the aim to bring it in line with the EU average within five years.
The tax credit on research, innovation and the start-up status would be kept. However, it has not yet been clarified whether the scope or rate of those “special schemes” would be reduced.
Also, dividends, capital gains on securities and interest are expected to be taxed around at flat rate of 30% from January 2018, including social contributions, which are currently taxed at the marginal rate of 63.5% (45% with respect to income tax, 4% with respect to high income tax and 15.5% with respect to social contributions).
Wealth tax, known in France as ISF is largely perceived as a competitive disadvantage by individuals, businesses and investors in comparison to other European countries. It is therefore planned to have it abolished
The wealth tax also known as ISF of France is highly considered as disadvantage by individuals, businesses and investors compared to other European countries and therefore it is planned to be abolished.
However, ISF would be replaced property wealth tax (IFI) or property income tax (IRI) and this would not include the market value of securities held in companies.