10. Other Business Taxes
- 10.1 Business Rates
- 10.2 VAT
- 10.3 Payroll Taxes
10.1. Business Rates - Taxe Professionnelle
The taxe professionnelle is a local tax imposed by the departmental and regional councils to assist in the funding of local services and the Chambres de Commerce/Metiers. It can best be compared with the 'non-domestic rates' (often called 'business rates') that a business in the UK will pay.
It is an enormously controversial tax. The government have stated that they wish to abolish it but no suitable alternative can be agreed between the government and the local councils. Some recent reforms have been agreed, but many fear only to further complicate things.
The formula for calculating the tax is probably only fully understood by those who administer the system but, broadly speaking, it is based on the value of property used by the business, plus a proportion of other assets.
A small business in one of the professions liberales (eg accountants, architects, artists etc) is taxed on 6% of gross earnings.
The actual rate of the tax (on property assets or earnings) varies by region but, whatever the rate, there is a general rebate of 16%.
If you have a small business that operates from home then the level of taxation may only be a few hundred euros a year, although in some areas, the local councils have stated that a minimum amount of tax shall be payable.
There are a number of permanent and temporary exemptions from the tax.
The most notable of these for the smaller business is an exemption for tradesmen and farmers.
There are also reductions and exemptions for companies located in development areas.
A new business gets 100% relief in the first year and 50% in the second year.
Even though a new company will be granted exemption in its first year (and possibly second year by local decision), you will be sent a Form 1003 for completion in your first year in order for the assessment process to be carried out.
The tax is payable at the end of each year in December and can also be paid in two instalments or you can elect to pay monthly.
As always, you would be well advised to take accountancy advice or speak to your Centre d’impôts to establish the likely level of the tax for your business.
10.2. VAT - TVA
TVA (Taxe sur la Valeur Ajoutée) is an expenditure tax imposed on consumers of goods and services.
Companies act as huge tax collectors for the Government not least in the collection of TVA, which generates more income than any other tax.
TVA is payable on almost all commercial goods and services, with few exceptions.
Nevertheless, the most notable of the exceptions is, residential property lettings, something likely to be of interest to many expats!
The main rate of TVA is 19.6% but there is a reduced rate of 5.5% for food, travel, some domestic personal services and most entertainment events. It is also available for property restoration projects provided carried out by a professional building contractor.
The reduced rate of 5.5% applicable to repair and improvement works is available to residential dwellings.
The rate is only applicable on the costs of professional labour and materials and is not available for materials only.
So, in the latter case, the materials would need to be purchased at 19.6%, whilst the rate on the labour would be 5.5%.
There is also a rate of 2.1% for medical prescriptions, TV licences, sale of live animals, press publications and certain entertainment events.
A micro-entreprise can neither claim or charge TVA but this option is available to regime réel companies and is obligatory if their turnover exceeds the TVA threshold.
The TVA turnover threshold is €27,000 for a service based business and €76,000 for commercial activities, bars and restaurants and furnished accommodation.
Accordingly, if you reach these levels of turnover you are obliged to charge TVA, although where these limits are only marginally exceeded by up to a few thousand euros, TVA need not be imposed for two years, including the year in which the limit was exceeded.
If you do not charge TVA because you are a micro-entreprise then all invoices to your customers must state that TVA is not applicable, as follows - 'TVA non applicable, art 293B due CGI'.
TVA returns need to be made monthly or quarterly depending on the level of turnover.
If the TVA paid is greater in any period than the TVA received then you may elect to either seek reimbursement or arrange a credit against the next declaration.
The form used for the TVA declaration is for regime reel companies is CA12, and only the brave dare to try and understand and complete it!
The return should be submitted by 30th April of each year or within three months of close of accounts if your accounting year is not the calendar year. The TVA declaration can be made and paid on the internet.
10.3. Payroll Taxes
There are a number of other employee taxes payable by companies.
i. Training Tax Participation à la formation professionnelle
A tax to assist in the development of continuous professional training levied at a variable rate depending on the number of employees in the business.
For a business with less than 10 employees the rate is 0.5%.
ii. Housing Tax Participation à l’effort de construction
A tax payable to assist the development of new and improved housing levied on a business with at least 20 employees at the rate of 0.45%.
iii. Apprenticeship Tax Taxe d’apprentissage
A tax payable by a business whose activity is either commercial, trade or industrial, to assist in the development of apprentice training.
Tax is levied at the rate of 0.50% on the total salaries of the business.
A business can be obtain exemption from this tax if they already make suitable provision for apprenticeship in the business.
iv. Salary Tax Taxe sur les salaires
Tax paid on the salaries of employees by those business’s who are exempt from TVA on their activities.
Even though a company may be subject to VAT, those companies below the TVA turnover threshold are exempt from the tax.
It is a tax that mainly concerns banks, finance companies, certain professions liberales, mutual organisations, so the tax is not particularly relevant for most people setting up a business in France.
The tax rate is on a progressive, sliced basis on the salary starting at 4.25% increasing to 13.60% on that part of the salary above €14,295 for 2007.
However, a rebate is then applied to the amount owed, in order to reduce the burden of the tax.
v. Company Car Tax Taxe sur les véhicules de société
Those vehicles owned and maintained by a company are subject to this tax.
A company car is a tax free perk, as the value of the car for private use is added to the remuneration of the beneficiary for the purposes of income tax and social security contributions.
In the event you are liable for the tax, the basis on which it is charged depends intially on the age of the vehicle.
In relation to those vehicles registered before June 04, and not owned by the company before Jan 06, it is based on the size of the engine.
For vehicles registered after June 04 the rate of taxation depends on the level of CO2 it emits.
As might be expected the tax favours newer, lower polluting cars over older vehicles.
The government has recently issued guidance on the detailed application of these new rules and we will update the site when the new regulations are clear to us.
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Work & Business in France