Corporate Taxation: Taxes, Deductions and Optimisation

Introduction

Corporate taxation constitutes one of the major strategic levers for an organisation's financial performance. In France, the tax framework applicable to businesses is based on a complex set of rules derived from the General Tax Code (CGI), the Monetary and Financial Code, and European directives. Between Corporate Income Tax (CIT), Value Added Tax (VAT), social contributions and Territorial Economic Contribution (TEC), managers must master a dense fiscal ecosystem to optimise their tax burden whilst strictly complying with legislation. This article offers a comprehensive overview of the main taxes, available tax deductions, applicable special regimes, and legal optimisation strategies for 2024.

Corporate Income Tax (CIT): mechanisms and rates

Corporate Income Tax applies by default to capital companies (SA, SAS, SARL) and, by option, to certain structures such as SCIs or EURLs. Since the progressive reform initiated by the 2018 Finance Act, the normal CIT rate has been reduced to 25% for all fiscal years starting 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 fully paid capital held at least 75% by natural persons. Beyond this bracket, the normal rate applies.

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

VAT: collection, deduction and applicable regimes

VAT, an indirect tax on consumption, represents the primary 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 VAT mechanism allows the business to deduct VAT incurred on its purchases (deductible VAT) from that collected from its customers (collected VAT). The balance is remitted to the tax administration according to a variable frequency: monthly, quarterly or annually depending on the tax regime.

Three regimes coexist: VAT exemption (exemption from VAT up to €91,900 of turnover for commercial activities), simplified regime (annual declaration CA12 with semi-annual instalments) and normal real regime (monthly declaration CA3).

Strategic tax deductions and tax credits

Legal tax optimisation largely relies 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% beyond that. The Innovation Tax Credit (CII) extends this scheme to SMEs at 20% of innovation expenses.

Other levers exist: productive super-depreciation, corporate sponsorship (60% reduction of contributions within 0.5% of turnover), deduction of loan interest (capped at 30% of fiscal EBITDA under the ATAD directive), and loss carryforward (forward without time limit, backward for one fiscal year within €1 million limit).

Legal tax optimisation strategies

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