France’s draft Finance Bill for fiscal year 2025, released on 10 October 2024 and expected to be finalised and enacted by the end of December, contains several tax measures that would affect companies, including the following:
Companies with annual turnover in France of at least EUR 1 billion would be subject to an exceptional surtax on corporate income tax for two years. In the case of a French tax consolidation group, the turnover to be considered would correspond to the sum of the turnover generated by each company in the group, thus increasing the corporate income tax due.
The rate of the exceptional contribution would depend on the turnover generated and the financial year concerned:
The exceptional contribution would be based on the corporate income tax assessment determined before the deduction of tax reductions, tax credits and tax receivables of all kinds and would be due at the same time as the corporate income tax balance (i.e., no instalment payments).
The exceptional contribution would not be deductible from the taxable result.
The draft Finance Bill also provides for a mechanism to mitigate the threshold effects for companies with turnover between EUR 1 billion and EUR 1.1 billion or between EUR 3 billion and EUR 3.1 billion.
The CVAE is based on the added value produced by a company during a fiscal year and is charged at a progressive rate that depends on the company’s turnover, with the maximum rate for companies currently set at 0.28%. Plans for the phase-out of the CVAE have been in process for several years. The FY25 draft Finance Bill postpones the abolition of the CVAE for another three years, from 2027 to 2030.
As part of the phase-out, the maximum CVAE tax rates are expected to decrease progressively as follows: 0.28% in 2025, 2026 and 2027, 0.19% in 2028 and 0.09% in 2029.
The draft Finance Bill provides for the introduction of a tax on a share capital reduction resulting from a share buyback that occurred as from 10 October 2024. The share buyback tax would only affect companies headquartered in France whose turnover exceeds EUR 1 billion (individual or consolidated turnover).
The share buyback tax would be equal to 8% of the amount of the reduction in share capital and a portion of the amounts booked as premiums in the accounts.
The tax would not be deductible from the taxable result.
The transaction would have to be declared, and the tax paid in the VAT return filed for the period in which the share capital reduction occurs.
Specific reductions in share capital would be exempt from the new share buyback tax, notably if the transaction is related to the allocation of free shares to employees and executives or in the context of merger/demerger with a limited share capital reduction (maximum of 0.25% of the share capital).
The 2025 finance bill includes technical amendments to France’s legislation implementing the 15% global minimum tax to incorporate most of the administrative guidance on Pillar Two published by the OECD.
Sacha Boksenbaum
BDO in France
- Introduction of a temporary corporate income tax surcharge on “large companies”;
- Postponement of the abolition of the local business tax (CVAE) until 2030 rather than 2027;
- Introduction of a tax on share buybacks made by companies with annual turnover exceeding EUR 1 billion; and
- Incorporation of the OECD Pillar Two administrative guidance into France’s Pillar Two rules.
New Temporary Contribution on Corporate Income Tax of Large Companies
Companies with annual turnover in France of at least EUR 1 billion would be subject to an exceptional surtax on corporate income tax for two years. In the case of a French tax consolidation group, the turnover to be considered would correspond to the sum of the turnover generated by each company in the group, thus increasing the corporate income tax due.The rate of the exceptional contribution would depend on the turnover generated and the financial year concerned:
| Turnover | FY24 | FY25 |
| Between EUR 1-EUR 3 billion | Surtax: 20.60% (ETR: 30.975%*) |
Surtax: 10.30% (ETR: 28.40%) |
| Over EUR 3 billion | Surtax: 41.20% (ETR: 36.125%) |
Surtax: 20.60% (ETR: 30.975%) |
| * Corporate income tax + 3.3% Social contribution + Exceptional surtax | ||
The exceptional contribution would be based on the corporate income tax assessment determined before the deduction of tax reductions, tax credits and tax receivables of all kinds and would be due at the same time as the corporate income tax balance (i.e., no instalment payments).
The exceptional contribution would not be deductible from the taxable result.
The draft Finance Bill also provides for a mechanism to mitigate the threshold effects for companies with turnover between EUR 1 billion and EUR 1.1 billion or between EUR 3 billion and EUR 3.1 billion.
Abolition of Added Value Contribution (CVAE)
The CVAE is based on the added value produced by a company during a fiscal year and is charged at a progressive rate that depends on the company’s turnover, with the maximum rate for companies currently set at 0.28%. Plans for the phase-out of the CVAE have been in process for several years. The FY25 draft Finance Bill postpones the abolition of the CVAE for another three years, from 2027 to 2030.As part of the phase-out, the maximum CVAE tax rates are expected to decrease progressively as follows: 0.28% in 2025, 2026 and 2027, 0.19% in 2028 and 0.09% in 2029.
Tax on Share Capital Reduction from Share Buyback
The draft Finance Bill provides for the introduction of a tax on a share capital reduction resulting from a share buyback that occurred as from 10 October 2024. The share buyback tax would only affect companies headquartered in France whose turnover exceeds EUR 1 billion (individual or consolidated turnover).The share buyback tax would be equal to 8% of the amount of the reduction in share capital and a portion of the amounts booked as premiums in the accounts.
The tax would not be deductible from the taxable result.
The transaction would have to be declared, and the tax paid in the VAT return filed for the period in which the share capital reduction occurs.
Specific reductions in share capital would be exempt from the new share buyback tax, notably if the transaction is related to the allocation of free shares to employees and executives or in the context of merger/demerger with a limited share capital reduction (maximum of 0.25% of the share capital).
Incorporation of OECD Administrative Guidance into Pillar Two Legislation
The 2025 finance bill includes technical amendments to France’s legislation implementing the 15% global minimum tax to incorporate most of the administrative guidance on Pillar Two published by the OECD.Sacha Boksenbaum
BDO in France