France

Taxable period

The ordinary taxable period is equal to 12 months. Conformity with the calendar year is not requested. In particular cases, the duration of the taxable period can be different from 12 months (e.g. newly established companies are allowed to have taxable periods longer than 12 months, companies that are involved in extraordinary transactions [merger, de-mergers, etc.], as well as companies that are liquidated, may have taxable periods shorter than 12 months).

Tax returns

For financial years ending on 31 December, the CIT returns must be submitted no later than the second working day following 1 May. If the tax return is , or if filed electronically, the French tax authorities allow an additional 15 calendar days.

Accounting records to be provided in 'computerised format' in case of tax audit

Companies are required to keep their accounting records in computerised form and to provide them to the tax authorities in the same format.

Payment of tax

Payment of CIT is made during the financial year by way of four instalments equal to 1/4 of the standard taxable income of the preceding year (i.e. by 15 March, 15 June, 15 September, and 15 December for financial years that end on 31 December). Regarding financial years that end on 31 December, final CIT payment is due on 15 May of the following year.

Currently, for companies with a revenue in excess of EUR 250 million, the last down-payment is assessed on the basis of the estimated taxable income of the current year. This last instalment plus the three previous ones should represent 95% or 98% of the CIT due on profits of the current year (95% for taxpayers with a revenue between EUR 250 million and EUR 1 billion and 98% for those with revenue in excess of EUR 1 billion).

Interest and penalties

Regarding CIT, VAT, registration duties, and business tax:

• late payment is subject to late interest computed at a rate of 0.2% per month (2.40% per year) and to a 5% penalty, and
• late filing is subject to late interest computed at a rate of 0.2% per month (2.40% per year) and to a 10% penalty.

Moreover, a penalty of 40% applies in case of bad faith increased to 80% in case of fraud.

Tax audit process

The French tax authorities are responsible for auditing that taxpayers’ obligations are correctly complied with and, if necessary, for making tax adjustments by issuing tax assessments.

Once an assessment is notified by the tax authorities and assuming that the taxpayer disagrees with such an assessment, it has a period of 30 days to submit their comments on the notified adjustments (with a possible 30-day extension upon request). Following exchanges between the tax authorities and the taxpayer (including hierarchical recourse), either party may submit any persistent disagreement on a factual issue to a tax commission (either at national or departmental level, depending on the size of the company) The decision of this commission is neither binding on the taxpayer nor on the French tax authorities.

In cases where the disagreement between the French tax authorities and the taxpayer still remains, the taxpayer can file a claim the French administrative courts, or the French judicial courts, depending on the type of tax that has been subject to assessment.

In France, there are two levels of jurisdiction in tax matters. The Supreme Court can rule on matters of tax law after the appeal decision, but it does not constitute a third level of jurisdiction.

Over the last years France has reinforced its criminal arsenal applicable to tax matters. The French tax authorities are now required to transfer to the prosecutor any tax reassessment exceeding the amount of EUR 100,000, provided that said reassessment notably gives rise to the application of a 100% tax penalty, 80% tax penalty, or 40% bad faith penalty in cases where a 40% or 80% tax penalty or a tax fraud proceeding already occurred in the past six years.

Under certain circumstances (notably the disclosure of a PE), regularisation processes are facilitated with the application of lower penalties.

Subject to some conditions, there is the possibility for companies to enter into enhanced relationships with the French Tax Administration in order to facilitate communication and ruling requests (so called ‘Relation de confiance’).

General anti-abuse rule (GAAR)

Exclusive tax purpose

To restore their true character, the French tax authorities are entitled to disregard, as not being enforceable against it, acts that constitute an abuse of law (i) either because these acts are fictitious or (ii) because, by seeking to benefit from a literal application of the laws or decisions against the objectives sought by their authors, these acts could not have been inspired by any other purpose than avoiding or mitigating the tax burden that the party concerned would normally have borne, given its actual situation or activities, had these acts not been executed or committed.

On top of the avoided taxes and the standard late payment interest, a 80% penalty for ‘abuse of law’ is applicable. Specific procedural rules aimed at providing enhanced guarantees to taxpayers, apply if the tax administration implements this penalty.

Principal tax purpose

A wider GAAR provision (so called ‘mini abus de droit’) also exist The French tax authorities may disregard an arrangement, or series of arrangements, put into place for the main purpose, or one of the main purposes, of obtaining a tax advantage that defeats the object or purpose of French tax law and is not genuine (which means that it does not rely on economic rationale). Penalties and procedural rules differs from those applicable under the regular abuse of law procedure.

Statute of limitation

Regarding CIT, the general statute of limitation expires at the end of the third year following the one that has triggered the tax liability. However, the FTA are entitled to challenge available tax loss carry-forwards without limit of time.

Under certain circumstances, the statute of limitation can be extended up to ten years (e.g. fraud, undisclosed/hidden activity). The statute of limitation can also be interrupted (e.g. international tax assistance).

The ruling system in France

To secure the tax status of a given situation, foreign companies can request a private ruling from the French tax authorities as to whether their activities constitute a PE in France.

The French tax authorities have to provide an answer within three months after the receipt of the request. In the absence of response within this period of time, the foreign company will be deemed not to have a PE in France.

The French tax authorities also provide for other specific rulings (e.g. for activities eligible to R&D tax credit, VAT rate applicable to specific transactions ...).

APAs are also provided by the French tax authorities for transfer pricing purposes. See the Group taxation section for more information.