France

Value-added tax (VAT)

VAT is due on goods sold and services rendered in France. The standard VAT rate is 20%. Sales of certain kinds of medicines and transports of persons are subject to the 10% VAT rate. Food products, subscriptions to gas and electricity (under certain circumstances), sales of books, and products and services provided to disabled persons are subject to the 5.5% reduced VAT rate. Other specific sales and services are subject to the 2.1% VAT rate ​(such as drugs that are reimbursable by social security, press). Supplies of goods outside France and certain specific services invoiced to foreign clients are, in principle, exempt from VAT.

Business-to-business (B2B) suppliers of services are generally taxable at the location of the customer and not at the location of the supplier. For business-to-consumer (B2C) supplies of services, the place of taxation is generally where the supplier is established.

VAT applies only to taxable persons, partly taxable persons, and non-taxable legal persons that are registered for turnover taxes.

Specific VAT rules apply to leases of transportation equipment, cultural, arts, and sports services,TV, radio, electronic, and telecommunication services, and transportation of goods.

Social contribution tax

The social contribution tax is due by any corporation at the rate of 0.16% assessed on the revenue excluding VAT and after deduction of a EUR 19 million relief.

Customs duties

Customs duties are payable when goods are imported into the European Union from a third country. They are determined on the basis of origin (preferential or non-preferential), tariff classification and customs value. There are ad valorem duties (taxes calculated by applying a percentage based on the value of the goods) or specific duties (duties based on the quantity of goods: weight, volume, number, and not the value). 

Reduced or zero customs duties can be levied on the imported goods thanks to free trade agreements between the European Union and third countries. 

Excise taxes

Alcohol, tobacco and oil products are subject to a specific regime involving complex obligations, both financial and administrative. For example, these arrangements require specific authorisations to be obtained beforehand, depending on the type of flow, notably in order to allow receiving, storing and moving these types of products. Obligations have been introduced to ensure the traceability of products subject to excise duty. The challenge for operators is therefore to fully comply with the regulations in force in view of the civil and criminal penalties incurred in the event of mismanagement. 

Eco-contributions (Extended Producer Responsibility - EPR)

In accordance with the ‘polluter-pays principle’, the concept of ‘Extended Producer Responsibility’ (EPR) provides that product manufacturers and distributors can be held responsible for managing waste throughout the life cycle of a product. The implementation of an EPR system involves the transfer of responsibility, costs, and waste management to the ‘producers.’ 

In France, EPR takes the form of various eco-contributions for different products categories, including electrical and electronic equipment, packaging, paper, textiles, furniture, tires, tobacco products, toys, mineral oils, etc. These eco-contributions represent a significant compliance challenge for businesses, both in terms of potential penalties and reputational impact. 

Environmental taxes

Environmental taxation has emerged as a prominent challenge in recent years, driven by the rapidly evolving societal expectations. Political initiatives aimed at promoting environmental sustainability have proliferated, placing greater emphasis on the role of economic actors in mitigating environmental impacts. 

This primarily concerns energy excise duties levied on the sale or use of certain products (formerly known as Domestic Consumption Tax on Energy Products (TICPE), Domestic Consumption Tax on Electricity Supply (TICFE), Domestic Consumption Tax on Natural Gas (TICGN), and Domestic Consumption tax on coal (TICC). It is important, however, to note that environmental taxation also encompasses various mechanisms related to natural resource protection, pollution control, and carbon emissions. 

3% tax on Real estate

All properties located in France are subject to a 3% real estate tax. The tax is assessed annually on the fair market value of the real estate, in proportion to the direct or indirect interest held. All entities in the chain of ownership are jointly liable for the payment of the tax.

Automatic exemptions apply, regardless of the State of establishment of the entity, (i) to international organisations, sovereign States and public institutions or entities under their control, (ii) to entities whose French real estate assets represent less than 50% of their total French assets, and, (iii) to entities listed on a regulated market whose shares, units, or rights are significantly traded on a regular basis.

Automatic exemptions also apply to entities having their registered office in France, in an EU member state, or in a country that has concluded a DTT with France providing for administrative assistance or a non-discrimination clause, where:

• their direct or indirect interest in the French real estate is less than either EUR 100,000 or 5% of the fair market value of the French real estate, or
• they are pension funds or public charities recognised as fulfilling a national interest whose activities justify the need to own French real estate, or
• they are non-listed French real estate funds (société de placement à prépondérance immobilière à capital variable [SPPICAV] or fonds de placement immobilier [FPI]) or foreign funds subject to equivalent regulations.

Where no automatic exemption applies , entities can obtain an exemption by providing the French tax authorities with detailed information concerning the real estate and the shareholders through, an annual tax return, or by undertaking to communicate such information. Entities subject to the French 3% real estate tax have to submit their tax returns electronically. This implies that foreign entities be duly registered in France.

Local non-income Taxes

The two main local taxes payable by companies are the Property Tax (Taxe foncière) and the Territorial Economic Contribution (Contribution Economique Territoriale [CET]).

Property Tax

The Property Tax is levied for the benefit of the municipalities, which set the tax rates annually (significant rate differences may therefore exist depending on location).

The tax is assessed on the rental value of the properties (buildings and lands) owned by companies. Various permanent exemptions (e.g. agricultural buildings) or temporary exemptions (e.g. new constructions for a period of two years) apply.

For buildings other than industrial establishments, the tax is based on the rental value of the property (determined locally according to the characteristics of the asset). For industrial establishments (i.e plants or large-scale warehouses) the tax is based on a percentage of the accounting value of the building.

Territorial Economic Contribution

The Territorial Economic Contribution consists of two separate taxes: the Business Property Tax (Cotisation Foncière des Entreprises [CFE]) and the companies’ added value contribution (Cotisation sur la valeur ajoutée des entreprises [CVAE]). The scope of these two taxes is similar but the calculation methods differ considerably.

The business property tax is assessed on the rental value of buildings and lands (either owned or rented), used by companies in the course of their business. The rental value is determined according to the same rules as the property tax. A 30% allowance applies to industrial establishments. The tax rate is determined by municipalities.

The companies’ added value contribution applies to companies with a turnover in excess of EUR 500,000 and corresponds to a percentage of the added value produced by the company. The percentage (tax rate) for companies whose turnover ranges from EUR 500,000 to EUR 50 million is assessed according to a progressive scale. For companies with a turnover in excess to EUR 50 million the rate is determined as follows for the period from 2025 to 2029 (as determined by the French Finance Act for 2025):

Value added is the difference between sales plus subsidies and certain expenses, including inventory purchases, external services and other operating expenses.

An additional contribution to the CVAE will apply in 2025 (French Finance Act for 2025). It corresponds to 47.4% of the CVAE.

Note that CVAE was due to be abolished as of 2027 (French Finance Act for 2024). However, the French Finance Act for 2025 has enacted the postponement of this abolition which is now scheduled for 2020. See Significant Developments section for more information.

The Territorial Economic contribution (i.e addition of the two taxes) is capped according to a percentage of the added value. This percentage is determined as follows for the period from 2025 to 2029 (as determined by the French Finance Act for 2025) :

Registration duties

Registrations duties mentioned hereafter are imposed on the purchaser. However, the seller may be liable for these duties in case of non-settlement by the purchaser.

Transfer of goodwill

The transfer of goodwill is subject to registration duties at a rate of 3% on the part of the transfer price from EUR 23,000 to EUR 200,000 and at a rate of 5% on the part exceeding EUR 200,000.

Transfer of shares

The transfer of shares is subject to registration duties at a rate of 0.1%. The transfer of listed shares is subject to registration duties only if the only if the transfer is recorded in a deed.

Transfer of interest or quotas in legal entities whose capital is not divided into shares

The transfer of interests or quotas in legal entities whose capital is not divided into shares (e.g. Société à responsabilité limitée [SARL] or Société en nom collectif [SNC], which are a form of private limited liability corporate entity) is subject to a registration duty of 3%.

Transfer of shares in non-quoted real estate companies

The transfer of shares in non-quoted companies whose assets consist principally of immovable property (or rights related to such immovable property) is subject to a 5% registration duties.

Transfer of real estate

The sale of land and buildings is subject to registration duties at a rate of 5.80%. This rate may be increased to 6.3% under certain conditions for contracts signed on or after 1 April 2025.

Exemptions or reduced rates

Specific exemptions applies certain transactions and notably to:

• Transactions subject to the Financial transaction tax (see below);
• Repurchase by companies of their own shares intended to be sold to the subscribers of a company employee saving plan, with some exceptions;
• Transfer of shares between companies in the same group within the meaning of Article L. 233-3 of the French Commercial Code;
• Transfer of ownership resulting from a merger, a contribution, or a spin-off made under the provisions of Article 210 A and 210 B of the FTC and acquisition of shares of a company by its employees.

A reduced transfer tax rate is applicable to purchases of building land and new buildings when the sale is subject to VAT on the full price.

Exit tax rules in case of transfer of French head office or establishment

In the case of a transfer of assets outside France as part of a transfer of a head office or an establishment, unrealised gains are immediately taxable. However, in the case of a transfer to an EU member state or, under certain conditions, to a European Economic Area (EEA) member state, taxpayers are able to either pay the full amount of tax immediately or pay it over five years in five equal instalments.

Payroll tax

Companies that are not liable for VAT on at least 90% of their annual turnover are subject to payroll tax (taxe sur les salaries) with respect to remunerations paid during the following calendar year. The tax base corresponds to a portion of the remunerations, determined by applying to said remunerations the ratio, existing the previous year, between the turnover that was not subject to VAT and the total turnover. The standard rate of the payroll tax is 4.25%, but increased rates apply to gross individual wages that exceed certain thresholds. Those increased rates are:

• 5% for wages ranging from EUR 8,985 to EUR 17,936;
• 6% for wages in excess of EUR 17,936.

French social security contributions

The French social security system is composed of various schemes providing a wide range of benefits. This system includes social security basic coverage, unemployment benefits, compulsory complementary retirement plans, complementary death/disability coverage, and complementary health coverage.

The contributions are shared between employer and employee; on average the employer's share of contributions represents 45% of the gross salary. For 2024, the employee’s share of French social contributions represents approximately 22% to 25% of the remuneration. However, since the contributions are assessed using various ceilings, the average rate will decrease as the gross salary increases.

Employers' contributions made to additional medical coverage schemes (which are mandatory and collective) are taxable.

Generally, for any employee who carries out a salaried activity in France, the employer withholds the employer's and employee's share of French social security charges.

Financial transaction tax (FTT)

FTT applies to acquisitions for consideration of equity securities or similar securities in the meaning of the French Monetary and Financial Code issued by certain French-listed companies (i.e. financial instruments giving access to capital or to voting rights in the company and securities issued under foreign law representing French-eligible securities). FTT applies regardless of whether the transaction is executed inside or outside of France.

The tax is due by the investment service provider (ISP) that has executed the purchase order or, when there is no ISP, by the custodian, irrespective of its place of establishment.

In most cases, the central securities depositary will be in charge of centralising the collection of the tax, the reporting to the French tax authorities, and the payment of the tax to the French Treasury.

The tax is computed based on the acquisition price of the shares.

The FTT rate is equal to 0.3% until 31 March 2025. The rate will be 0.4% for transactions settling as of 1 April 2025.

Digital services tax 

A 3% digital tax applies to companies providing certain digital services in France with global annual revenue in excess of EUR 750 million and annual revenue in France in excess of EUR 25 million. The tax applies, in particular, to the provision of a digital interface by means of electronic communications allowing a user to contact and interact with other users, as well as services to advertisers or their agents aimed at placing targeted advertising messages on the digital interface based on the interface user's data collected or generated through the case of such interface.