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
for 2030), local property taxes and payroll tax (see 5.1 Taxes Applicable to Employees/Employers ). 5.3 Available Tax Credits/Incentives Several tax credits and incentives are available to French resident companies and French PEs: • Tax losses : Tax losses can be carried forward indefinitely (up to EUR1 million plus 50% of the taxable profit per FY) or carried back one year (up to EUR1 million). • Parent - subsidiary regime : A 95% exemption applies to dividends received by a French parent from eligible French or foreign subsidiaries, where it holds at least 5% of the share capital of the distributing entity for at least two years. This results in an effective rate of approximately 1.3% (further reduced within tax-consolidated groups – see 5.4 Tax Consolidation ). • Long - term capital gains regime : Capital gains on the disposal of qualifying equity participations (French or foreign) are effectively taxed at approxi - mately 3.1%. Shares in real estate-oriented com - panies are excluded. • R & D tax credit ( crédit d ’ impôt recherche ): Equal to 30% of eligible R&D expenses up to EUR100 mil - lion, and 5% above. Any excess credit is refunded after three years, or immediately for SMEs and newly created companies. • Innovation tax credit ( crédit d ’ impôt innovation ): Available to SMEs at 20% of eligible expenses incurred for the design and prototyping of new products, capped at EUR400,000 per year. • Young Innovative Enterprise ( jeune entreprise inno- vante ) regime : Open to SMEs incorporated for less than eight years, at least 50% owned by individuals or qualifying entities, and devoting at least 15% of their deductible expenses to R&D. Benefits include exemption from employer social contributions on qualifying R&D personnel, and potential property tax and Company Property Tax ( Cotisation foncière des entreprises ) exemptions for up to seven years. • IP box regime : Optional 10% taxation on qualify - ing net income (nexus calculation) derived from the licensing, sublicensing or transfer of certain IP assets (mainly patents and copyrighted software).
transactions). VAT incurred for business purposes can be offset or refunded. VAT applies to both French and foreign companies doing business in France. Special rules govern cross-border transactions. Transfer Tax Transfer tax is applicable to certain asset transfers, with rates varying depending on the type of transac - tion: • transfer of a stock company’s shares: 0.1% (intra- group exemption available); • transfer of a non-stock company interest ( part sociale ): approximately 3% (intra-group exemption available); • transfer of shares in a real estate-oriented com - pany: 5%; • transfer of a going concern, client base or assimi - lated assets: approximately 5%; and • transfer of real estate assets: generally, between approximately 5.9% and 6.4% (with a 0.6% surtax for office, commercial and warehouse assets located in Île-de-France); lower rates may be avail - able subject to conditions. Transfer tax applies to transactions executed in France or involving assets located in France, irrespective of the tax residence of the parties. Pillar Two Rules France transposed into domestic law the Income Inclusion Rule (IIR) and the Qualified Domestic Mini - mum Top-up Tax (QDMTT), applicable from 1 Janu - ary 2024, as well as the Undertaxed Payment Rule (UTPR), applicable from 1 January 2025, in order to ensure a global minimum effective tax rate of 15% for multinational groups with consolidated annual rev - enue of at least EUR750 million. France’s Pillar Two rules have been granted transitional qualified status on the OECD’s central record. Other Taxes French resident companies and French permanent establishments may also be subject to other taxes in France. Notable examples include business property tax, companies’ social security contribution, CVAE ( Cotisation sur la Valeur Ajoutée des Entreprises – cur - rently being phased out with full elimination scheduled
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