The finance law for 2021 was promulgated on December 29th, 2020. It provides for certain technical measures for taxation of corporation and includes numerous provisions designed to support companies affected by the sanitary crisis.
- CIT reduced rate adjustment for SMEs
As from January 1st, 2021, for SMEs, the turnover’s threshold to benefit from the 15% reduced rate has been increased to €10m.
As a reminder, for fiscal year ended as from January 1st, 2021, the standard CIT rate is 26.5% for companies with a turnover amounting to €250m and 27.5% beyond.
- Step up of assets: deferral of taxation of the gain
For step up of assets free revaluations carried out during a fiscal year ending on or after December 31st, 2020 until December 31st, 2022, companies have the option of (i) spreading over the taxation of the step-up gain for depreciable assets and (ii) deferring taxation, until the date of disposal of the asset, for non-depreciable assets.
- Spread of the capital gain on sale and lease back of real property
The capital gain realized on the sale and leaseback of a Real estate companies are therefore excluded. property to a credit institution may be spread, on option, over the term of the contract, without exceeding 15 years.
This mechanism only concerns companies that own buildings used for their business or that lease the building to a related entity that uses the building for its business.
The purpose of this temporary measure (disposals made between January 1st, 2021 and June 30th, 2023) is to enable companies to improve their cash flow while avoiding immediate taxation.
- Adjustments to R&D tax credit and Innovation tax credit
The rules for taking into account outsourced expenses are harmonized: the doubling of the base and the €2m increase in the €10m ceiling for expenses outsourced to public research organizations are suppressed.
According to procedures yet to be specified, all research organizations will have to be approved.
These provisions apply to research expenses incurred as of January 1st, 2022.
Finally, requests for ruling or expert opinions must henceforth be sent to the ministry in charge of research alone.
Measures for lessors
- A tax credit for lessors who waive rents for the month of November 2020
Lessors who have waived rent before December 31st 2021, for rent due in November 2020, may benefit, under certain conditions, from a tax credit up to 50% of the total amount of rent waivers granted.
Capped at €800k per lessee, this tax credit will be deductible from the corporate income tax due for 2020 or 2021, depending the fiscal year during which the waiver is granted, and the excess will be refundable immediately.
- Extension of the deductibility of rent waivers
Lessors who have waived rent between April 15th, 2020 and December 31st, 2020, or who agree to waive rent before June 30th, 2021, will be able to deduct these rent waivers from their taxable result without having to justify the commercial interest for tax purposes.
If the lessor and the lessee are related parties, the waiver will only be deductible if its commercial nature can be demonstrated.
At the same time, the income related to the waiver will be taxable at the lessee's level but will increase the ceiling of €1m for the computation of the tax losses carry-forward.
Supporting measures for companies in difficulty
- Possibility to obtain early repayment of the carry-back claim to companies in conciliation proceedings.
- Possibility of unconditional deduction of debt waivers realized in favour of companies in conciliation proceedings.
- Extension of the temporary exemption from corporate income tax in favour of companies created for the takeover of companies in difficulty.
- Tax regime applicable to contributions into a company of a debt repurchased at a discounted value: the condition of absence of related party link between the initial creditor and the debtor company when the capital increase is carried out in the context of a conciliation, safeguard or recovery plan has been removed (applicable as from the financial year ending December 31st 2020).
Other tax measures
- The reduced rate applicable to late interest has been maintained (0.2% per month).
- Repeal of the obligation to register certain company deeds (capital increase (in cash, by incorporation of profits or reserves etc.), capital reduction, capital depreciation and setting up of EIGs).
Value Added Tax
- Creation of the "VAT group regime"
This optional regime, currently implemented in 19 EU Member States, consists in treating two or more eligible persons presenting financial, economic and organisational links, as a single VAT-taxable person. Transactions realized between VAT group members will be disregarded for VAT purposes, meaning that VAT will not be charged on such supplies of goods and services. The group’s representative member will be responsible for preparing and filing the VAT returns and paying the VAT amount due on behalf of the group. The VAT group will be effective on January 1st, 2023. The scope of Article 261 B of the FTC will in parallel be modified.
- Postponement of the entry into force of the e-commerce directive
The date of entry into force of the reform of the VAT rules on e-commerce is postponed by 6 months. It will be effective on July 1st, 2021.
- Introduction into the French Tax Code of the case law principles governing composite transactions
The case-law principles governing composite transactions (services consisting in several elements governed by different VAT regimes) are included in a new Article of the FTC (Article 257 ter of the FTC): each operation must be analysed independently, without being artificially split. A single offer including non-ancillary components with different VAT rates must have the highest VAT rate applied to the whole offer. Exceptions to this principle are specified and detailed in the Law.
- Gradual introduction of e-invoicing between 2023 and 2025
The Government is empowered to take measures to gradually generalise the use of e-invoicing: an obligation to accept electronic purchase invoices as from 2023 and an obligation to issue electronic invoices between 2023 and 2025 (according to a timetable taking into account the size of companies).
- Rate of the contribution for value added (CVAE)
The CVAE rate is reduced by 50%: the rate applicable to companies realizing turnover of more than €50 million is therefore reduced to 0.75% and the proportional and progressive tax rate applicable to companies realizing turnover between €500k and €50 million is also reduced by half.
- Capping of the territorial economic contribution (CET)
The CET cap, based on added value, is lowered from 3% to 2%.
- Accounting valuation of industrial premises
The interest rates used to determine the accounting rental will take place according to a new prorata value of industrial premises is reduced by 50% from 2021 onwards. Their annual revaluation
- Land contribution (CFE) exemption
The creation and extension of establishments can benefit, as of 2021, from a CFE exemption for 3 years.
Authors: Stéphany Brévost, Partner, Attorney-at-law, Elvire Tardivon-Lorizon, Partner, Attorney-at-law, Ronan Journoud, Attorney-at-law and Ivan Gay, Attorney-at-law.