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French action plan for investment and growth Tax aspects

On 11 September 2017, The French Prime Minister unveiled the outline of its Action plan for investment and growth. Main measures having an impact on tax are the followings:

  • Simplification and amplification of the gradual decrease of the Corporate Income Tax (CIT) rate already initiated by the Finance Act for 2017

The standard CIT rate (33.33% in 2017) will gradually decrease to 25% up to horizon 2022 as shown below:

2018 2019 2020 2021 2022
28% for the first 500 k€ of profit and 33.3% beyond  

31% [1]








Note that the reduced 15% CIT rate will continue to apply to SMEs with a P&L lower to 7.63 M€ for the part of their profits which is below 38 120 Euros.

  • The 3% surtax on dividend distributions will be repealed for dividend payments made in 2018

The Government indicates that it will not be compensated by any other permanent tax.

  • Reduction (2018) then deletion (2019) of the CICE tax credit and creation (2019) of a relief on employer’s contributions

The basis of the CICE tax credit will be reduced to 6% of wages paid in 2018 that do not exceed 2.5 times the French minimum wage (SMIC). For 2019, the CICE tax credit will be replaced by a relief on employer’s contributions on the basis of 6% of wages below 2.5 times the SMIC to which an additional relief representing 4.1% of wages at SMIC level[2] will be added.

Note that compared to the previous system, this change will mechanically increase the CIT of companies as it reduces deductible costs (employer’s contributions) entering in the determination of the taxable result. This was not the case with the CICE due to its “tax credit” nature. In comparison to the CICE mechanism and for small SMEs subject to a reduced CIT rate of 15% (for the part of taxable income below €38 120), this additional CIT burden will be more than offset by the increased in contribution relief. However and depending on their specific situation, larger companies taxed in 2019 at the standard CIT rate of 31%, may be in a different situation as they may suffer an additional CIT burden proportionally bigger which could render mutatis mutandis the new mechanism less efficient than the previous one.

  • Introduction of a 30% flat-tax on capital income

This measure, which relates to personal income tax, should enter into force in 2018 and should submit all the capital incomes to a flat tax at a rate that should be around 30% (including both social security contributions and income tax). This tax would be applied on interest, dividends and capital gains. Specific tax measures for Livret A, insurance life below 150 k€, employee savings as well as PEA should however remain unchanged.

  • Replacement in 2018 of the wealth tax for individual by a tax on real estate properties

While maintaining an identical scale as the current one applying for wealth tax, the tax base will be determined by reference to the net real estate properties belonging to the taxpayer, assuming their total net value exceeds 1.3 M€ (note that the real estate dedicated to the principal residence benefit from a 30% discount for determining its fair value and that buildings assigned to the business of the taxpayer are out of the scope the tax).



[1] the rate of 28% still applies for the first 500 k€ of tax result.

[2] sliding scale up to 1.6 SMIC