FRANCE Law and Practice Contributed by: Véronique Millischer, Léna Sersiron, Eléonore d’Anthonay, Guillaume Nataf, Olivia Chriqui-Guiot, Pauline Celeyron, Damien Berruyer and Nella Picou, Baker McKenzie Paris
Employers bear a significant social security burden, with contributions typically representing approximate - ly 40% to 45% of gross remuneration. However, as certain employer contributions are also capped, the effective rate may decrease to approximately 25% to 30% on remuneration exceeding EUR385,000 (2026). Payroll Tax Employers that are not subject to VAT, or that are subject to VAT on less than 90% of their turnover, are liable to payroll tax ( taxe sur les salaires ). This tax is calculated on total gross remuneration paid to employees and is levied at progressive rates: • 4.25% on the portion of annual salary below EUR9,147; • 8.50% on the portion between EUR9,147 and EUR18,259; and • 13.60% on the portion above EUR18,259. Banks and financial institutions are among the main taxpayers subject to payroll tax, given that a signifi - cant portion of their activity is VAT-exempt. 5.2 Taxes Applicable to Businesses Direct Tax Under French tax law, French resident companies are taxed on a domestic basis, whereas non-resident companies are only subject to corporate income tax (CIT) on profits attributable to France (eg, through a French permanent establishment, or in respect of French-source dividends, royalties, rental income and certain real estate or share-related capital gains). A distinction is made between non-tax-transparent and tax-transparent companies. Non-tax-transparent companies are personally lia - ble for CIT, at a standard rate of 25%, increased to 25.825% (through a 3.3% surcharge) where CIT due exceeds EUR763,000. A temporary non-deductible CIT surcharge also applies to companies or tax-con - solidated groups with French-source turnover of at least EUR1 billion (for FYs closed as from 31 Decem - ber 2025) or EUR1.5 billion (for FYs closed as from 31 December 2026). It is calculated on the average CIT due for the relevant and preceding FY, at 20.6% (turnover EUR1–3 billion) or 41.2% (turnover above
EUR3 billion), with a smoothing mechanism to miti - gate threshold effects. Tax-transparent companies are not personally liable for CIT; however, they are required to calculate a tax - able income. Their shareholders are then liable to CIT or income tax on their share of taxable profits – includ - ing non-resident corporate shareholders. Withholding Taxes France imposes withholding taxes on certain pay - ments to non-residents: • dividends: 12.8% for non-resident individuals and 25% for non-resident companies; • services rendered in France and paid to a foreign resident with no French presence: 25%; • royalties: 25%; and • profits deemed distributed by a French PE to its foreign head office: 25%. Likewise, (i) French real estate capital gains, (ii) gains on shares in French real estate-oriented companies and (iii) gains on disposals of shares in French compa - nies where the seller holds 25% or more of the share capital are subject to CIT at 25%. Interest payments to non-residents are not subject to withholding tax, unless paid in a non-cooperative jurisdiction. These rates may be reduced or eliminated under applicable tax treaties or, for intra-EU flows, under the Parent-Subsidiary Directive (withholding tax exemp - tion where the recipient holds at least 10% of the distributing company shares for a minimum of two years) and the Interest and Royalties Directive (with - holding tax exemption where a direct shareholding of 25%+ exists between the paying and receiving entity, directly or through a common parent, for at least two years). These exemptions are subject to anti-abuse conditions and may be claimed upfront or a poste - riori. Higher withholding tax rates apply for transac - tions with non-cooperative jurisdictions (see 5.7 Anti- Evasion Rules ). VAT VAT is charged on the supply of goods and services at a standard rate of 20% (alternative rates of 10%, 5.5% or 2.1% may apply, depending on the nature of the
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