10. Other Business Taxes in France

1. 10.1. Business Rates
2. 10.2. VAT
3. 10.3. Payroll Taxes

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10.1. Business Rates - Contribution Economique Territoriale (CET)

The Contribution Economique Territoriale (CET) is a local tax imposed by the departmental and regional councils on businesses to assist in the funding of local services and the Chambres de Commerce/Metiers.

The tax was introduced in January 2010, replacing the previously controversial form of business rates called the taxe professionelle.

The taxe professionnelle was a peculiar exception française.

The formula for calculating the tax was very complex. Broadly speaking, however, 20% of the tax was based on the rateable value of the property, and 80% based on the value of the capital machinery and equipment employed in the business.

As the tax weighed primarily on capital employed, the more a company invested, the larger its tax burden!

The abolition of the taxe professionnelle now effectively removes the second, preponderant element of the former tax, that based on capital equipment.

The Contribution Economique Territoriale (CET) is made up of two component parts:

• The Cotisation Foncière des Entreprises (CFE), based the rateable value of the property occupied by the business.
• The Cotisation sur la Valeur Ajoutée des Entreprises (CVAE), based on the ‘value added’ each year by the business - more or less the wealth created by the business each year, a figure which is also used to calculate liability to VAT.

The government estimates that, in total, the reform will reduce the tax burden on business by an average of 22%, which rises to 32% for industrial companies, and 42% for construction companies.

The greatest gainers will be small to medium sized businesses, as business with a turnover of less than €500K will not pay the second element of the tax. It is estimated their tax bill will go down by around 50%.

In addition, the industrial companies are granted an abatement of 30% on the rateable value of their property, against which the CFE element of the tax will be charged.

Those who establish a new business as an auto-entrepreneur benefit from an exemption from business rates for three years (including the start-up year), provided they opt to pay a fixed standard rate of income tax each month, an option that is you need to consider with care, as you might not otherwise be liable to income tax.

There are also exemptions for companies located in development areas.

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.

Local councils have the discretion to set a minimum level of rates, which is really aimed at to cover those circumstances where the business has no real estate.

The minimum rates depend on the level of turnover of the business:

• Between €200 and €2000 where the turnover of the business is less than €100,000.
• Between €200 and €6000 where the turnover of the business is equal or greater than €100,000.

The reference year used for determining the turnover figure is two years prior to the year of imposition.

The tax is payable at the end of each year in December and can also be paid in two instalments.

As always, you would be well advised to take good accountancy advice, or speak to your Centre d’impôts to establish the likely level of the tax for your business.

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