We present below a summary of the main measures of the finance law for 2022.
The presentation is divided into three chapters which are:
- Determination of tax results and corporation tax calculation,
- Various measures.
I – Determination of tax result and corporation tax calculation
Common rules for determining the result
> Renewal of the application of favorable regimes
The following favorable regimes provided for in the framework of the regional planning policy are renewed until December 31st 2023:
- Rural revitalization areas
- Regional aid areas
- Urban Free Zones
- Employment areas to be revitalized
- Urban basins to be revitalized
- Priority development areas
- SME investment support zones
- Priority districts of the city policy
> Option of individual entrepreneurs for corporation tax
- The finance law provides for a regime comparable to that provided for the sole proprietorship with limited liability (EIRL or EARL). It also provides for the separation of personal and professional assets.
The individual entrepreneur may opt for assimilation to a sole proprietorship with limited liability or to a liability farm on condition that he is not subject to the micro BNC, micro BA or special BNC declaration regime.
The option is irrevocable and constitutes an option for corporation tax.
However, withdrawal will remain possible during the first five years following the activation of the option.
- The contractor’s net earnings will be subject to social security contributions. In addition, the dividends received by the individual entrepreneur will enter into the basis of his contributions for the part exceeding 10% of the amount of the net taxable profit for the financial year preceding the distribution.
- These provisions may only enter into force on the date of entry into force of Article L. 526-22 of the Commercial Code.
> Temporary faculty of tax depreciation of goodwill of small businesses
This depreciation is possible at the accounting level but not at the tax level. The law now provides for a temporary tax deduction for the depreciation of goodwill:
- The fund must be acquired between January 1st 2022 and December 31st 2025;
- Amortization must be accounted according to accounting standards;
- It cannot be added to a provision.
> Extension of the tax deferral provided for in the event of a merger and similar transactions
The General Tax Code provides that natural persons associated with an agricultural non-trading company, subject to income tax, can now benefit from a tax deferment for the net capital gains on contributions made by this company to the occasion of a merger, a partial contribution of assets relating to a complete branch of activity or a split.
This measure applies to income tax due for the year 2021 and subsequent years.
> Tax credit for replacement expenses for farmers
This tax credit is extended until 2024. From January 1, 2022, its rate is increased to 60% for expenses incurred to ensure a replacement for leave due to illness or an accident at work.
> Tax credit for organic farming
- The tax credit is increased from 3500 euros to €4500;
- The cumulative amount of tax credit and European aid for organic production is limited to €5000 (instead of €4000);
- The application of the tax credit is extended until December 31st 2025.
These measures come into force on January 1st 2023.
> Exemption from capital gains in the event of retirement
>> Extension of the cases of exemption in the event of lease-management
Until now, the transfer of a business in management could only be exempted on the condition that it was transferred to the tenant manager. From now, the sale of an activity put under lease-management to any person other than the lessee-manager may be exempted, in the event that the latter does not take over the activity, provided that the sale of the fund is accompanied by the transfer of all elements contributing to the operation.
>> Temporary extension of transfer deadlines in the event of retirement: extension from 24 months to 36 months
Sale of a company in the event of retirement: when the transferor asserts his retirement rights between January 1st 2019 and December 31st 2021 and this retirement precedes the transfer, the period provided for by these provisions is extended to three years.
Regarding the exit tax: the transfer can take place within 3 years of retirement if this occurs between January 1st 2019 and December 31st 2021.
>> Capital gains from the sale of securities in the event of retirement
Extension of the period of application of the fixed allowance of €500,000: this system has been extended until December 31st 2024.
The taxpayer must claim his pension rights in the two years following or preceding the transfer. For retirements made between January 1st 2019 and December 31st 2021, the period is 3 years.
> Increase in the exemption thresholds for the sale of low-value businesses
Capital gains on the sale of goodwill are now fully exempt when the value of the fund does not exceed €500,000 and partially (decreasingly) when their value is greater than €500,000 and does not exceed €1 million.
The same calculations apply in the event of the transfer of all the shares of a partnership.
> Coming into force
In the absence of a specific provision to come into force, the above measures should apply to the taxation of capital gains realized from 2021 (or for financial years ending on or after December 31st 2021).
> Doubling of the training tax credit for managers of very small businesses
Companies that incur expenses to train their managers can benefit from a tax credit equal to the number of hours of training multiplied by the hourly rate of the minimum wage, up to a limit of 40 hours per calendar year.
The amount of this tax credit is doubled from January 1st 2022 for companies qualified as micro-enterprises, within the meaning of European regulations.
> Tax credit for collaborative research
In the case of the conclusion of collaboration contracts with certain organizations and provided that certain obligations set by law are met, the rate of the collaborative research tax credit is set at 40% (or 50% for small and very small companies).
> Live performance tax credit
The exceptional deadline for obtaining final approval was set at 36 months from the provisional approval. This period is extended by 15 months for shows that obtained their provisional approval between July 1st 2019 and June 2nd 2021.
> Art businesses tax credit
The application of this tax credit is extended until December 31st 2023.
> Tax credit for zero-rate loans
The application of this tax credit is extended until December 31st 2023. For loan offers issued from January 1st 2022, the ceiling is increased to €50,000 and the repayment period is increased to 20 years.
> Option of micro-enterprises for the real regime
The option must be exercised within the time limits applicable to the filing of the declaration subscribed for the year preceding that for which this option applies.
In the event of the creation of a business, the option is exercised within the time limits applicable to the filing of the declaration subscribed for in respect of the year of the first period of activity.
> Option for the special declaration regime
The option must be exercised within the time limits provided for filing the declaration. It is valid for one year and tacitly renewed each calendar year for one year.
> Coming into force
These new deadlines apply to options or waivers exercised as of January 1st 2022.
International taxation: Withholding tax due by non-resident companies
In principle, a withholding tax (RAS) applies to the sums paid by a debtor who exercises an activity in France to persons or companies who do not have a permanent professional establishment in this country in certain cases provided for by the law (CGI Article 182 B).
Article 182 B also provides that the deduction is based on the totality of the sums corresponding to the remuneration of the activity carried out in France and that no charge can be deducted. This rule was judged to be contrary to the principles of free movement of capital and freedom to provide services.
Thus, for withholding tax which the generating event occurs on or after January 1st 2022, a flat-rate allowance equal to 10% of the sums or products subject to the said withholding, provided that the beneficiary of the sums or products meets the following two conditions:
- Be a legal person or an organization whose profits are not subject to income tax in the hands of a partner;
- Have its head office or a permanent establishment (in the result of which the sums or products are included) located in a Member State of the European Union (EU) or in another State party to the Agreement on the European Economic Area having concluded an administrative assistance agreement with France with a view to combating fraud and tax evasion and not being non-cooperative within the meaning of Article 238-0 A.
New retrospective withholding tax refund procedure:
Non-resident legal persons or organizations subject to withholding tax may subsequently request the restitution of the difference between the withholding tax paid and that calculated from a base from which the directly related acquisition and custody charges are deducted.
II – V.A.T.
Removal of statistical functions from the DEB
Since January 1st 2022 the declaration of exchange of goods will now be the subject of two forms:
- The declaration of customer summary statements for VAT purposes;
- Reporting of statistical data by companies.
An automatic pre-filling device will be offered to companies so as not to increase their reporting obligations.
Import VAT adjustments
We have covered this subject through an article published in February 2022 entitled “RECAP OF SELF-LIQUIDATION OF VAT ON IMPORTS FROM JANUARY 1st 2022”.
Easing of the conditions of option for the VAT of the actors of the financial sector
Until now, only a global option was possible. The reform makes it possible to opt for transaction-by-transaction taxation.
Tax base of transactions provided in exchange for the delivery of Multipurpose Vouchers
> The general rules of the tax regime for vouchers, from the point of view of VAT
It is a document given to its beneficiary which includes an obligation to accept it as total or partial consideration for the supply of one or more deliveries of goods or services. The deliveries of goods or services concerned are indicated either on the instrument itself or in the corresponding documentation.
A voucher is said to be “multiple use” when the place of delivery of the goods or the provision of the services to which the voucher relates and the value added tax due on these goods or services are not known at the time of issue of the voucher (for example: a gift box).
> VAT application rules
It is only when the operations linked to the voucher are carried out that the VAT is due, all the elements likely to allow the liquidation of the VAT then being known.
The law specifies the procedures for determining the VAT base for transactions provided in return for the remittance of multipurpose vouchers in the absence of information on these transactions.
Article 266-1 a bis of the CGI is now worded as follows: “Without prejudice to the application of a, the tax base for the delivery of goods or the provision of services carried out in connection with a voucher multiple is equal to the consideration paid in exchange for the voucher or, in the absence of information on this consideration, to the monetary value indicated on the multi-purpose voucher or in the corresponding documentation less the amount of value added tax relating to the goods delivered or the services provided”.
Collection of installments upon delivery of goods
Currently the chargeable event occurs, in principle, at the time of delivery, the liability also occurs at the time of delivery.
This measure advances the date of payment of VAT on the supply of goods to the date of payment of the installments. This will allow businesses to deduct VAT earlier on their purchases and to pay VAT earlier on their sales.
This text will apply to installments received from January 1st 2023.
III – Various measures
Regime applicable to “intermediate housing”: replacement of the property tax exemption by a corporate tax claim
Until now, the CGI provided that new housing assigned to the main dwelling is exempt from property tax on built properties for 20 years. This system replaces the 20 year exemption from TFPB enjoyed by owners of intermediate rental accommodation with a corporation tax claim of the same amount and for the same duration, for accommodation completed as of January 1st 2023.
Payment of the 3% tax on the market value of buildings
Payment of the tax on the market value of buildings owned in France must now be made by electronic payment.
Reporting obligations for electronic linking platform operators
From January 1st 2023, these platforms will have to submit a declaration to the tax authorities relating to the transactions carried out by sellers and service providers through them.
Concealment of assets abroad
Tax adjustments resulting from the failure to declare accounts and financial contracts abroad are subject to an 80% increase.
The perpetrators of this breach may also not set off against the reminders in question the deficits and reductions in income tax and real estate wealth tax which could not previously be set off against regularly declared income.
All the team of French Business Advice is at your disposal to explain you all this, so do not hesitate to contact us!
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