FLASH – France Tax News 2016 – Andreae Associates
Like every year, the new Finance Bill 2016 should be approved at the end of December. The following highlights the proposals that are relevant to foreign companies and foreign individuals.
Value added tax
Foreign entrepreneurs that sell directly to French private customers have to be careful in 2016.
Under the actual distance selling rules, an entrepreneur that sells directly to French private customers can have sales up to 100.000 € before the entrepreneur has to register for VAT purposes in France. In this case, the entrepreneur can charge the applicable VAT rate of the EU member state from which the goods were shipped. Under the proposed change, distance sellers from other EU member states to France would bear VAT as soon as the total amount of sales realised in France by the operator exceed 35.000 €. European entrepreneurs who’s sales are between 35.000 € and 100.000 € have to be very careful from 2016 on, since if they forget to register for VAT in France, the french tax authorities might not only tax the foreign companies at the actual french VAT rate of 20% (in most of the cases) but might actually add the interests and a penalty of 80% of the originally due VAT.
Corporate Tax
Surtax on corporate income tax: Companies subject to corporate tax whose turnover exceeds 250 million € are subject to a surtax on the corporate income tax equal to 10.7% of the company’s corporate tax liability. Introduced in 2011, the surtax was intended only to apply until fiscal years ended on or before 30 December 2015; however, this date was extended to 30 December 2016 by the amended finance law for 2014. The Minister of Finance now has confirmed that the surtax will be eliminated at the end of 2016. As a result, the maximum effective corporate income tax rate applicable to large companies would decrease to 34.43% compared to the current 38% (not taking into account the 3% surtax on dividends distributed).
Income tax
The Budget increases the income tax-exempt threshold to 9.700 €. On income above this threshold, rates of income tax will fall. Income above the tax-exempt thresholds up to 26,791 € will be subject to a rate of 14 percent. Above that, income up to 71.826 € will be subject to a 30 percent rate. The next threshold, on the portion of income up to 152.108 € will feature a 41 percent rate, while income over this amount will be subject to a 45 percent rate.Taxpayers with an income exceeding 40.000 € will newly be required to file personal income tax returns online, ahead of a move to a deduction-at-source income tax regime. This threshold will fall to 28.000 € in 2017 and to 15.000 € in 2018. It will become mandatory for all taxpayers from 2019. The Government will legislate for exceptions for taxpayers with legitimate reasons for having no access to the internet, mirroring a move by the UK.
Dirk ANDREAE-NEHLSEN
Avocat à la Cour
11, rue René Goscinny
75013 Paris