Finance Act for 2019: Main provisions concerning Companies

The second part of this finance law is devoted to the provisions concerning companies.

We will limit ourselves through this article to summarize the major measures of this text. You can of course ask us for clarifications.

I – Field of application of tax

1. Companies located in priority development zones

Small and medium-sized enterprises that settle in economically underdeveloped areas (whose characteristics and list are defined by the government), benefit under certain conditions from the following exemptions:

• Total exemption from income tax during the first 23 months,
• Partial tax exemption on profits for the next 36 months,
• Exemption from property tax,
• Exemption from “C.F.E.” (Cotisation Foncière des entreprises : Contribution to land investment) for 7 years from the year following the creation.

2. Possibility of revoking an option for corporation tax

Starting in 2019, commercial corporations that opt ​​for corporation tax may waive this option during the next five years. The company will not be able to opt for this tax again.

II – Deductible expenses

1. Financial expenses

In order to fight against international tax evasion, the government limits the deduction of financial expenses to the limit of the greater of the following two amounts:

• Three million euros,
• 30% of income before taxes, interest, provisions and amortization (EBITDA).

The text also provides for the following measures:

• An additional deduction is allowed for the companies members of a group whose results are consolidated,
• The deduction is limited to one million euros or 10% of the “EBITDA” for undercapitalized companies,
• Non-deductible financial charges may be carried forward indefinitely in time,
• A special scheme is provided for groups of companies as part of the fiscal consolidation

All of these provisions apply to fiscal years beginning on or after January 1^st 2019.

2. Depreciations

• A new “over-amortization” system is in place for small and medium-sized enterprises. It relates to certain assets acquired between January 1^st 2019 and 31^st December 2020.
  A list of these assets has been provided for by law (we keep it at your disposal on your request), they must all be assigned to an industrial activity.
  Companies can deduct from their profits an additional amount equal to 40% of the initial value of these assets.

• 40% “over-depreciation” is provided for refrigeration and air handling equipment using refrigerant fluids.
• The law allowing the “over-amortization” of trucks operating on electricity or hydrogen is extended until December 31^st 2021. The rates are as follows:
  • 40% for vehicles over 3.5 tonnes,
  • 60% for vehicles with a total laden weight of less than 16 tonnes,
  • 20% for vehicles with a gross weight of between 2.6 and 3.5 tonnes.
• “Over-depreciation” is introduced for the owners of commercial vessels acquired or built between January 1^st 2019 and December 31^st 2021, flying the European flag.

These vessels must operate with hydrogen or “G.P.L.”

III – Products of assignment or concession of patents

A new regime has just been adopted by the French state to agree with the approach of the O.C.D.E. and the European Union, the “nexus” approach.

The new device is not exposed in this article but we can of course give details or explanations to those interested.

IV – Tax consolidation

The group scheme is amended to be brought into line with European Union law.

This concerns:

• The scope of intra-group dividends taxed at 1%, it is extended to certain situations assimilated to tax consolidation (companies located in another European state in particular),
• For intragroup dividends that are not eligible for the “Company-subsidiary” plan, the law provides for the possibility of imposing only a 1% share. In addition, this scheme is extended under certain conditions to dividends received by non-affiliated companies from subsidiaries established in a Member State of the European Economic Area,
• Tax neutralization on grants and write-offs between companies is removed,
• The share of costs and charges for capital gains on equity securities is no longer neutralized,
• Terminations or group exits are facilitated,
• The consequences of “brexit” on the perimeter of tax-integrated groups are now provided by law.

All of these measures are effective for fiscal years beginning on or after January 1^st 2019.

V – Tax reductions & Tax credits

1. Takeover of a company by its employees

Eligibility conditions for the tax credit are relaxed. The participation of only one employee of the company in the redemption is now allowed.

This measure is applicable from January 1^st 2019 to December 31^st 2022.

2. Research tax credit

A description of the research work must now be provided to the administration by companies that commit more than two million Euros in research expenses.

VI – Corporate tax and miscellaneous taxes

Here we indicate a simple list of the main measures:

• Modification of the calculation of the last corporate tax installment for companies with an annual turnover of at least 250 million Euros,
• Introduction of an “anti-abuse” clause in the area of ​​corporate tax in order to fight against tax evasion,
• Extension to small enterprises of the spreading of capital gains taxation in the event of a seller’s credit on the sale of the company,
• VAT system for e-commerce: These benefits are taxable in the country of establishment of the service provider when their amount does not exceed € 10,000 per year,
• Enlargement of the scope of the VAT self-liquidation on imports,
• Rental value of industrial establishments for local taxes: Exclusion of industrial building qualification when the value of technical equipment does not exceed € 500,000,
• Device for combating transactions designed to avoid withholding tax on dividends from foreign countries,
• Submission to the “tax on company vehicles” of vehicles equipped with a double cab platform with 4 doors “Pickups”.

Do not hesitate to contact us for any question on this subject!