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The French Corporate Tax is an annual tax affecting all profits made in France by corporations and other entities. It covers about a third of French companies. Legal persons may be subject to corporation tax at the following tax rates:

· The standard rate of 33.1 / 3% for all of their activities;

· Rates reduced by 15% for the first EUR 38 120 of taxable income;

· Reduced rates of 0% for capital gains in the long term from the sale of equity securities.

SCOPE OF FRENCH CORPORATION TAX

CORPORATE TAX ASSESSED AT STANDARD TAX RATE

The corporate tax is levied on certain corporations because of their legal form. Therefore are taxable to CT whatever their purpose, the limited companies (SA and SAS), the limited liability companies (LLC), companies limited by shares and, in some cases, cooperatives.

French CT also applies to other legal persons in consideration of the nature of their activity. Such is the case of civil societies that engage in trade or business and, more generally, other legal persons engaged in an operation or operations for profit.

In addition, partnerships, whose results are normally included in income associated with their due share of profit, may opt in some cases for their subjection to CT.

CORPORATE TAX ASSESSED AT REDUCED TAX RATE

The reduced tax rate of 15% applies to the first 38,120 euros of annual profits. Any corporation taxable to CT in France can benefit each year from the reduced rate of 15% subject to the following conditions:

- The company's capital must be fully paid and held continuously for at least 75% by individuals or a company meeting the same conditions;

- The company must have achieved a turnover excluding taxes less than 7 630 000 euro; during the year or the tax period.

TAX CONSOLIDATION

An optional system, referred to as Tax Consolidation or Group Tax Consolidation, allows a French parent company to incorporate in its fiscal benefits, the results of the French subsidiaries which it controls for at least 95%. The parent company thenfore pays the corporate tax for all group companies.

RULES OF TERRITORIAL

Unlike the rules in force in all other countries of the European Union applying a system of worldwide profits, French entities are only liable to the CT in respect of their profits in businesses operating in France. It follows that the profits made by a French company in companies operating abroad are not subject to the French CT. On the other hand, a foreign company is liable to French CT on profits from businesses it operates in France.

Therefore, companies which are taxable in France may not deduct from their taxable income losses incurred by companies that operate abroad.

The concept of "company operated in France" involves the ordinary course of business in France, which may be exercised within the framework of an autonomous or, in the absence of establishment, through representatives without personality, independent professional or result from the execution of operations forming a complete business cycle.

DETERMINATION OF TAXABLE INCOME

A / GENERAL RULES FOR DETERMINATION OF EARNINGS

Companies subject to corporate tax must take into account when determining their taxable income, all debts and liabilities existing at year-end closing.

Pretax profit is determined by the overall results of operations of any kind made by the Company including transfers of assets.

The tax base is typically deemed to be equal to the difference of net assets between the closing balance sheet and the opening balance sheet. In principle, the taxable income is the accounting profit, but it is subject to adjustments to reflect tax rules that depart from accounting rules.

B: COMPUTATION OF TAXABLE INCOME

The taxable income is equal to the difference between gross profit and operating accessory products on the one hand, and costs and expenses deductible on the other.

Under accounting rules, the gross operating profit is formed by the difference between:

- Sales and benefits of exercise and the existing inventory at year end and

- The cost of sales and services and the existing inventory of the previous year.

In addition to the gross operating profit, all income or profits accessories made by a company are generally taxable. This includes income from rental property, interest receivables, deposits, bonds and income securities.

French parent companies may exclude from their taxable income, dividends received from their French or foreign subsidiaries, subjecto to a share equal to 5% of total income.

The fees and expenses are deductible under the following conditions:

- They must be exposed in the direct interest of the operation or be linked to the normal management of the company;

- They must correspond to an effective charge and be supported by sufficient evidence;

- They must be included in expenses for the year in which they were incurred and result in a decrease in net assets of the company;

- Their deductibility should not be undermined by a particular provision of the law. Certain expenses are specifically excluded as allowable expenses do not conform to the purpose of the business: expenses related to hunting or fishing, expenses incurred for the provision of yachts and pleasure boats ( Expenditure classified as luxuries).

Meanwhile, more long-term capital gains are taxed separately to reduced rates of 0%, 15%, or 16.5%, possibly plus the social contribution paid by companies whose turnover exceeds € 7,600,000.

LIQUIDATION AND PAYMENT OF FRENCH CORPORATION TAX

The result of these various adjustments may occur:

- A positive result, the earnings on which French CT is calculated;

- A negative result, the deficit, which may count against an unlimited duration on the benefit of years following the year in deficit (carry forward) or, optionally, under certain conditions, the benefit of the three previous years ( carry back or "carry-back) and give birth in the latter situation, a claim chargeable to tax of five years and repayable at the end of this period.

The tax is calculated and paid voluntarily by the company as a system of installment that is subject to adjustments when the results of the exercise are set permanently.