France

Tax consolidation regime

The Finance Act for 2024 extends the benefits of the tax consolidation regime (i.e. the exemption up to 99% of French corporate income tax [CIT]) to dividends received by French companies that have, deliberately, not elected for the tax consolidation regime. Such exemption applies to dividends distributed by foreign companies established within the European Union (EU) (or the European Economic Area [EEA] under certain conditions) to French companies, provided that shareholding conditions are met.

However, for financial years ending on or after 31 December 2023, the Finance Act for 2024 reintroduces a minimum period after which such dividend distributions are eligible for this exemption.

Reinforcement of transfer pricing controls

In order to strengthen the administration's ability to detect and punish the abusive use of transfer pricing rules, the Finance Act for 2024:  

• reduces the threshold for triggering the transfer pricing documentation requirement from 400 million to 150 million euros (EUR) for financial years starting from 1 January 2024, and
• increases to EUR 50,000 the minimum fine for failure to provide transfer pricing documentation for offences committed from 1 January 2024.

Hard-to-value intangibles

To enable tax authorities to fully apply Organisation for Economic Co-operation and Development (OECD) principles to control the price of intangible asset disposals, the Finance Act for 2024 introduces the possibility for the French tax authorities, for financial years starting from 1 January 2024, to adjust the value of a transferred hard-to-value intangible asset or right on the basis of results subsequent to the financial year in which the transaction took place. 

Public Country-by-Country (CbC) Reporting

On 21 June 2023, France transposed the EU Public CbC Reporting Directive. The measure requires both EU-based multinational enterprises (MNEs) and non-EU based MNEs doing business in the European Union through a branch or subsidiary with total consolidated revenue of more than EUR 750 million in each of the last two consecutive financial years to report publicly the income taxes paid and other tax-related information, such as a breakdown of profits, revenues, and employees.

Reduction of French production taxes 

In order to improve competitiveness, the territorial economic contribution (CET) started to decrease over previous years.

The 2021 Finance Bill also provided for a reduction of the rental value of industrial facilities (notably used to calculate the land contribution [CFE]) by half, pursuant to a defined accounting method. The reduction is applicable to the tax due as of 2021.

The Finance Bill for 2023 provided for the repeal of the business value-added contribution (so-called ’CVAE‘, one of the components of the CET) over a two-year period and its abolition in 2024. The Finance Act for 2024 postpones the abolition of the CVAE to 2027. 

In parallel with the abolition of the CVAE, the rate of the cap on CET according to value added, currently set at 2%, will be decreased as depicted in the table below:  

New 'green industry tax credit' ('crédit d'impôt pour l'industrie verte' or C3IV)

The 2024 Finance Bill introduced a tax credit for green industry equal to 20% (or 25% to 40% depending on the geographic area of investment) of the amount of eligible expenses incurred. The tax credit could amount to a maximum of EUR 150 million per company (or EUR 200 million to EUR 350 million in the case of investments in specific areas). 

Eligible investment expenditures are incurred in connection with activities contributing to the production of batteries, solar panels, wind turbines, and heat pumps. 

This tax credit would apply to applications filed as of 27 September 2023 and would apply to accredited investments until 31 December 2025. 

Tax regime for reinsurance captive companies

The Finance Bill for 2023 creates a specific tax regime for certain captive reinsurance, defined as an undertaking owned either by a financial undertaking (with certain exceptions) or by a non-financial undertaking, the object of which is the provision of reinsurance cover relating exclusively to the risks of the undertaking or undertakings to which it belongs, or to the risks of one or more other undertakings in the group of which it forms part. The purpose of this provision is to facilitate the creation of captive reinsurance companies in France by offering them a favourable tax regime in order to promote a better insurance offer, by allowing them to negotiate with third-party insurers (‘fronters‘) insurance coverage more adapted to their needs.

This new tax regime provides that captive reinsurance undertakings held by an undertaking other than a financial undertaking and whose object is the provision of reinsurance cover relating exclusively to the risks of undertakings other than financial undertakings may constitute, tax-free, a provision to cover expenses relating to accepted reinsurance operations whose insurance risks fall within the categories of damage to professional and agricultural property, natural disasters, general civil liability, pecuniary losses, and pecuniary damage and losses resulting from damage to information and communication systems and transport. 

These provisions entered into force on 1 January 2023.

Possibility to offset convention tax credits on French taxation (upon capital gains and dividends): Key decisions

The French administrative jurisdictions have ruled that the French 5% taxation of dividends at the level of the beneficiary under the participation exemption regime (i.e. EU Parent-Subsidiary Directive) and the French 12% taxation of long-term capital gains (i.e. shares representing securities that qualify as ’titres de participations‘) constitute an effective taxation against which foreign tax credits may be offset (Administrative Supreme Court, 15 November 2021, n°454105, L’Air Liquide, Administrative Court of Appeal of Lyon, 27 January 2022, n°20LY00698, Sté A. Raymond & Cie and Administrative Supreme Court, 5 July 2022 n°463021, Sté Axa). 

Claims can be addressed to the French tax authorities in order to benefit from the foreign tax credits over the years that are not statute barred (i.e. 2020, 2021, and 2022 for financial years closed on 31 December and if the claim is sent in 2023).

There is still uncertainty about the exact amount that can be claimed (Administrative Supreme Court 7 April 2023 n° 462709, min. c/ Sté A. Raymond et Cie).

Application of the double tax treaty (DTT) between France and the state of the beneficial owner (as not being the direct beneficiary): Key decision

A recent decision from the French Administrative Supreme Court (Conseil d'État, 9e et 10e ch., 20 mai 2022, n°444451, Sté Planet) has recognised, for the first time, the applicability of a reduced withholding tax (WHT) rate provided by the DTT between France and the state of the beneficial owner (i.e. as being the indirect beneficiary of the income paid), as opposed to the withholding rate provided by the tax treaty between France and the state of the direct beneficiary of the income (in the case at hand, royalties).

Such possibility is subject to several and specific conditions (notably the collection of a precise and complete documentation), which are to be validated on a case-by-case basis.

Value-added tax (VAT) group

As of 1 January 2023, Article 11 of the Directive 2006/112/EC of 28 November 2006, whereby each member state may regard as a single taxable person any persons established in the territory of this member state who are legally independent but are closely connected with each other for financial, economic, or organisational purposes, will be implemented in France under new Article 256C of the French Tax Code (FTC). This new regime would be optional and would reinforce the neutrality of VAT for groups, particularly in sectors carrying out tax-exempt transactions. Taxable persons who have elected to form a single taxable person would have to appoint one of them as the head of the group in order to comply with all the obligations related to the tax and make the tax payments, in respect of which all members would remain jointly and severally liable. The group would be set up for a minimum period of three years.

Electronic e-invoicing reform postponed 

Officially announced in a press release on 28 July 2023, the postponement of the entry into force of the e-invoicing reform, originally scheduled for 1 July 2024, has now been ratified, following the adoption of amendments introduced by the French government as part of the adoption of the Finance Act for 2024. 

The timetable for implementation of the e-invoicing reform is now as follows: 

• In 2025 (month to be confirmed): Opening of the pilot phase (instead of 1 January 2024); registration opens in 2024. 
• 1 September 2026: Obligation to issue e-invoices for large and mid-sized companies (instead of 1 July 2024 and 1 January 2025, respectively.
• 1 September 2027: Obligation to issue e-invoices for small- and medium-sized enterprises (SMEs) (instead of the 1 January 2026). 
• As of 1 September 2026, the reception of electronic invoices will apply to all companies, whatever their size. 

Customs

The Union Customs Code (UCC), which came into force on 1 May 2016, originally provided for the implementation of interoperable national information systems. 

However, the UCC and its delegated regulation granted a transitional period to Member States to develop and adapt their IT systems by 31 December 2025, with the aim of dematerialising and facilitating the exchange of information between them. 

France will soon be offering a new customs clearance service, DELTA I/E (import/export). This service will gradually become the norm and will eventually replace all existing customs clearance applications (DELTA G, ECS BC, DELTA X import, and DELTA X export). 

Within the framework of DELTA I/E, the current customs declaration (Single Administrative Document or SAD) will be replaced by an electronic message including approximately 120 data elements. Postponed several times, DELTA I/E is due to come into force progressively from November 2024 in France.

Excise duties  

Amended Council Directive (EU) 2020/262 of 19 December 2019 establishing the general arrangements for excise duty came into force on 13 February 2023 and replaces Council Directive 2008/118/EC of 16 December 2008, providing, in particular, for the dematerialisation of the Simplified Accompanying Document (SAD) via the entry into force of the Simplified Electronic Administrative Document (SEAD).  

This reform applies to movement permits covering movement between professionals (B2B) located in two Member States for which excise duties have been paid in the country of departure. 

For this type of flow, the use of a dematerialised accompanying document is compulsory. As in the case of movements under suspension, the new SEAD implies the need for discharge, as well as the deferral of compulsory information for the purposes of electronic monitoring. 

On the other hand, this reform has no impact on the distance-selling system (i.e. duty-paid movements from a professional to a private individual [B2C]) or on duty-paid movements of excise goods within the national territory.