Decline of the corporate tax rate: schedule and conditions

July 3rd 2019

Migration to a further modification of the schedule for an incremental decline of the ordinary corporate tax rate?

It must be recalled that a schedule for a decline of the ordinary corporate tax rate (“CT”) had been initially set in the context of the 2017 finance law, then modified by the 2018 finance law.

A schedule for an incremental decline of the CT rate 

In practice, the applicable law provides for the following decline of the ordinary CT rate:

  • For the fiscal years opened in 2018, the ordinary CT rate is set at 28% for the fraction of the profits not exceeding 500,000 euros and 33.33% thereafter;
  • For the fiscal years opened in 2019, the ordinary CT rate is set at 28% for the fraction of the profits not exceeding 500,000 euros and 31% thereafter;
  • For the fiscal years opened in 2020, the ordinary CT rate is set at 28% for all the profits;
  • For the fiscal years opened in 2021, the ordinary CT rate is set at 26.5% for all the profits;
  • For the fiscal years opened in 2022, the ordinary CT rate is set at 25% for all the profits.

Nevertheless, Article 2 of the draft bill for the creation of a digital services tax (the GAFA tax), adopted upon first reading by the Senate on the 21st of May this year under the same terms as the National Assembly, provides for the continuation of the corporate tax rate for large corporations (with a turnover at least equivalent to 250 M€) at 33.33% for the fraction of the profits exceeding 500,000 euros for the fiscal year opened in 2019 and ended on March 6, 2019.

Accordingly, subject to the final adoption of the draft bill for the creation of the GAFA tax, three ordinary CT rates could be applicable for the fiscal year 2019.

Finally, it must be recalled that the SME, meeting the conditions referred to in Article 219, I-b of the French General Tax Code  automatically benefit from a reduced CT rate of 15% for a fraction of their taxable profit capped at 38,120 €, valuated per 12 month periods.

Guillaume Duchene