Business Taxation: Taxes, Deductions and Optimisation

Introduction

Business taxation constitutes one of the major strategic levers for an organisation's financial performance. In France, the tax framework applicable to businesses rests on a complex set of rules derived from the General Tax Code (CGI), the Monetary and Financial Code, and European directives. Between Corporation Income Tax (CIT), Goods and Services Tax (GST), social contributions and the Economic and Territorial Contribution (ETC), business leaders must master a dense tax ecosystem to optimise their tax burden whilst scrupulously complying with legislation. This article provides a comprehensive overview of the main taxes, available tax deductions, applicable special regimes, and legal optimisation strategies for 2024.

Corporation Income Tax (CIT): Mechanisms and Rates

Corporation Income Tax applies by default to capital companies (SA, SAS, SARL) and, optionally, to certain structures such as SCI or EURL. Since the progressive reform initiated by the 2018 Finance Act, the standard CIT rate has been reduced to 25% for all financial years commencing from 1 January 2022, in accordance with article 219 of the CGI.

SMEs benefit from a reduced rate of 15% on the first bracket of €42,500 of profits, subject to conditions: turnover below €10 million and capital fully paid-up and held at least 75% by individuals. Beyond this bracket, the standard rate applies.

The calculation of taxable profit differs from accounting profit: certain expenses must be added back (fines, non-deductible taxes, excessive gifts), whilst other income may benefit from favourable regimes (long-term capital gains taxed at 0% on participating shares, parent-subsidiary regime exempting 95% of dividends received).

GST: Collection, Deduction and Applicable Regimes

GST, an indirect consumption tax, represents the largest source of tax revenue for the French State. The applicable rates are: 20% (standard rate), 10% (restaurants, renovation work), 5.5% (essential products, books) and 2.1% (reimbursable medicines, press).

The GST mechanism allows the business to deduct GST incurred on its purchases (input GST) from that collected from its customers (output GST). The balance is remitted to the tax authority according to variable frequency: monthly, quarterly or annual depending on the tax regime.

Three regimes coexist: exemption from GST (GST exemption up to €91,900 of turnover for commercial activities), the simplified regime (annual return with biannual instalments) and the standard real regime (monthly return).

Strategic Tax Deductions and Tax Credits

Legal tax optimisation largely rests on the judicious use of deductions and tax credits. The Research Tax Credit (CIR), codified in article 244 quater B of the CGI, allows deduction of 30% of R&D expenses up to €100 million, and 5% above. The Innovation Tax Credit (CII) extends this scheme to SMEs at 20% of innovation expenses.

Other levers exist: accelerated depreciation, corporate sponsorship (60% reduction on contributions up to 0.5% of turnover), deduction of loan interest (capped at 30% of tax EBITDA under the ATAD directive), and loss carry-forward (unlimited forward, backward against one financial year up to €1 million).

Legal Tax Optimisation Strategies

Effective tax optimisation combines several approaches: choice of appropriate legal structure, arbitration between remuneration/dividends for the director, strategic location of activities, and use of international tax conventions to avoid double taxation. Tax consolidation (article 223 A of the CGI) allows groups held 95% to consolidate their tax results, offsetting profits and losses of subsidiaries.