Corporate Tax 2025

Last Updated March 18, 2025

France

Law and Practice

Authors



Jeantet was founded in 1924 and is the second-oldest independent French business law firm still active on the French market. Its reputation extends far beyond national borders, with operations in over 150 jurisdictions worldwide. For decades, the firm has been at the forefront of the legal scene, built around a dynamic and ambitious management team. Jeantet attracts talent, as evidenced by the increase in the number of partners to 41 over the past five years, and in the number of associates and support teams to over 200 experts today. Jeantet’s internationally recognised tax team advises companies, family shareholdings, investment funds and private banking establishments. It regularly works in the industry, food, real estate development, ultra-high net worth individual (UHNWI), entertainment, capital investment, luxury goods and champagne, merchant banking and private banking sectors.

There are two main groups of companies in France:

  • Limited companies (ie, simplified limited liability companies (sociétés par actions simplifiées; SAS), private limited liability companies (sociétés à responsabilité limitée; SARL), public limited companies (sociétés anonymes; SA); and
  • Partnerships (sociétés en nom collectif, sociétés civiles and sociétés en commandite simple).

Limited companies are subject to corporate income tax (CIT) as separate legal entities, while partnerships are pass-through entities (the tax is calculated at the level of the company, but is effectively paid by the shareholders). Please note that specific structures, such as sole proprietorship (entreprise individuelle), may exist for taxpayers with limited activity.

Sociétés civiles and sociétés en nom collectif are commonly used for property investments. However, depending on the type of rentals, sociétés civiles may be subject to CIT. Such companies may also be incorporated as an alternative to the French tax consolidation regime (régime de l’intégration fiscale) provided for by Article 223 A of the French Tax Code.

The entities commonly adopted for private equity or venture capital firms are fonds professionnels de capital investissement (FPCIs), fonds commun de placement à risque (FCPRs), sociétés de capital-risque (SCRs) and sociétés de libre partenariat (SLPs), which are not subject to CIT per se.

Usually, the effective place of management and/or the place where the company is liable to tax determine its tax residency. There are no special rules in France governing the tax residency of transparent entities; their tax residency depends on the place where they are effectively managed.

French-resident companies are subject to CIT at a rate of 25%. However, for companies that can qualify as small to medium-sized enterprises, a reduced corporate tax rate of 15% will apply up to the first EUR42,500 of profits. French companies with turnover exceeding EUR7.63 million are also subject to a social surcharge of 3.3% calculated on the amount of CIT that they owe, reduced by an allowance of EUR763,000.

Shareholders of transparent entities are personally liable to tax on their share of profits – either to personal income tax (individual or company) or to CIT.

When the shareholder is an individual, the profits will be subject to progressive income tax (at a maximum rate of 45% plus social contributions).

The rules applicable for determining the amount of taxable profit will depend on individual’s activity.

The taxable basis corresponds to accounting profits adjusted by tax rules (ie, the non-deductibility of CIT, limitation of deductibility of financial charges as the case may be, partial exemption of taxation of dividends/capital gains subject to certain conditions, etc). In principle, only justified expenses incurred during the relevant tax year and incurred in the direct interests of the company deducted for tax purposes.

The profits of a corporate entity are taxed on an accruals basis.

French companies may benefit from research tax credits, innovative tax credits and tax credits for expenses invoiced by research and knowledge dissemination organisations.

France has also implemented an optional intellectual property (IP) box regime (patent box), which is a preferential tax regime on income from the exploitation of IP assets. Subject to certain conditions, net income from licenses and sales of patents, software and similar intangible assets is subject to a preferential CIT rate of 10% instead of the standard rate of 25%.

There are special incentives for real estate investment entities (sociétés d'investissements immobiliers cotées (SIICs) or sociétés à prépondérance immobilière à capital variable (SPPICAVs)), venture capital investment companies (sociétés de capital-risque; SCRs) and young innovative enterprises (jeunes entreprises innovantes), which can be exempted from CIT (fully or partially).

Carried-forward losses incurred during a financial year may be deducted from the profits of subsequent financial years without any time limit. There is no need to ask for the deduction of carry-forward losses: they must be automatically offset against the taxable result of the year.

There is a ceiling on the amount of the loss that can be carried forward to the following year. It is limited to EUR1 million per year plus 50% of the fraction of the profit in excess of this ceiling.

Carry-back losses is an alternative to the standard carry-forward loss regime. Companies subject to corporation tax can choose to carry back a loss recorded at the end of a financial year and offset it against the profit of the previous financial year for up to EUR1 million.

When the short-term or long-term regimes apply to the sale of the company’s assets, income losses or long-term capital losses could be offset against short-term capital gains/long-term capital gains subject to specific limitations.

In France, complex rules limiting the deductibility of interest payments made by a French borrower to its shareholder or any related party apply.

Interest paid by a company to its direct shareholder is limited to the rate set forth under Article 39-1-3° of the French Tax Code. For FY24, this rate was 5.75 %.

For loans granted by related parties, the foregoing rate applies, or a higher rate that the debtor could have obtained from independent financial establishments under similar conditions (in this case, the maximum allowed interest rate corresponds to the arm’s length interest rate).

Moreover, companies subject to CIT that do not belong to a French tax consolidation group may deduct their net financial expenses on only up to 30% of their earnings before interest, taxes, depreciation and amortisation (tax-adjusted EBITDA) or EUR3 million per fiscal year if higher. When the company belongs to a consolidated group, from an accounting perspective, it may benefit – under certain conditions – from an additional deduction (ie, a safeguard clause).

Finally, except in some specific cases, the amount of deductible interest is capped at 10% of prorated tax-adjusted EBITDA (in order to exclude debts to non-affiliated companies from the calculation) or EUR1 million prorated, whichever is higher if the company is thin-capitalised (where the average amount of related-party debt exceeds one and a half times the amount of its net equity). Safeguard clauses may also be applicable to circumvent this limitation.

Equivalent provisions exist for companies that are members of a French tax-consolidated group.

Specific limitations also apply to companies that are members of a tax-consolidated group (“Charasse limitation”). Non-deductible interest may be carried forward indefinitely.

French tax law provides for the possibility of setting up a vertical or horizontal tax consolidation group. A tax consolidation group must be set up between companies subject to French CIT that open and close their financial years on the same dates and the years must have a 12-month duration. The parent company has to hold, directly or indirectly, 95% of the share capital of the subsidiary, and the parent company must not be at least 95% held, directly or indirectly, by another company subject to French CIT. Elections must be held within specific deadlines.

When no tax consolidation group has been set up, only shareholders of partnerships that have generated losses can offset the share of losses corresponding to their interest in the partnership against their own taxable result subject to CIT (subject to restrictions).

Favourable tax treatments exist for capital gains arising on the disposal of substantial investments.

Sales of qualifying investments (as defined by French law) are exempt from capital gains tax, but a lump sum of 12% corresponding to costs and expenses must be recaptured and taxed at a CIT rate of 25%, corresponding to an effective tax rate of 3%.

Specific provisions apply to capital gains resulting from the disposal of shares of listed real estate companies that have been held for more than two years (taxation at a rate of 19%).

Some exemptions also apply to the sale of venture capital investment entities complying with specific requirements and held for at least five years, and the disposal of certain intellectual rights can be taxed at a reduced rate of 10%.

Incorporated businesses can also be subject to stamp duties on transactions. Stamp duties are due on the transfer of shares and are payable by the buyer. Depending on the kind of shares sold, the applicable rate may vary from 0.1% to 5% (for real estate companies).

VAT (at a rate of 20%) could also be applicable depending on the type of assets sold.       

An additional social security surtax of 3.3%, calculated based on the amount of CIT, may be due by companies with a turnover exceeding EUR7.63 million.

French companies may also be subject to the territorial economic contribution (which includes the business premises contribution (cotisation foncière des entreprises) and the business value-added contribution (contribution sur la valeur ajoutée des entreprises)) property tax and local taxes.

At the time of writing, in the first quarter of 2025, over the last four months, the rate of incorporation of closely held local businesses operating in non-corporate form has been higher than the rate of incorporation of businesses operating in corporate form (the non-corporate form accounts for 65.2% of the incorporations in the last four months). See Enterprise births - December 2024, INSEE Statistics.

The taxation of dividend distributions by a company (at a global rate of 30%), in addition to taxation of the company’s income (at a rate of 25%), could prevent individual professionals from earning income at corporate rates.

The effective tax rate in case of distribution of all the company’s income would be 47.5%.

There is no rule that prevents closely held corporations from accumulating earnings for investment purposes.

Individuals are taxed on dividends at a flat rate of 30% (12.8% of income tax plus 17.2% of social contributions), or at the progressive income tax rate (maximum of 45%) with the application of a tax allowance of 40% – ie, 60% of the dividend may be taxed (plus a potential surtax of 3% or 4%).

Individuals who sell shares in a company are taxed at the flat rate of 30%, plus a potential surtax of 3% or 4%. However, in some cases – eg, for shares acquired before 2018 – individuals can opt for taxation at the progressive income tax rate. In this case, an allowance based on the length of time for which the shares have been held may apply.

See 3.4 Sales of Shares by Individuals in Closely Held Corporations.

Interest

Under French tax law, any interest payment made by a French company to a foreign entity is exempt from withholding tax unless the lender is established in a non-cooperative state and territory (NCST) regarding the exchange of tax information. In such a case, a 75% withholding tax may apply subject to exceptions.

Dividends

Dividends distributed by French companies to non-resident shareholders are, in principle, subject to a withholding tax in France at a rate of 25% for companies and 12.8% for individuals.

The tax treaties concluded by France may reduce such rates.

Moreover, under the Parent-Subsidiary Directive, dividends distributed to an EU parent company may be exempt from French withholding tax if the recipient is subject to CIT and holds or commits to hold at least 10% of the subsidiary’s share capital for at least two years. The French parent subsidiary regime may be dismissed if it is used abusively (under anti-abuse provisions).

The withholding tax rate is increased to 75% for dividends paid to an entity established in an NCST.

Royalties

Under French tax law, a withholding tax of 25% may apply on outbound royalty payments. Tax treaties concluded by France may reduce this rate.

A 75% withholding tax may apply in case of payment of royalties to a company established in an NCST.

Luxembourg is often used by foreign investors to make investments in local corporate stock of debt.

Indeed, no substantial participation clause is provided in the tax treaty between France and Luxembourg regarding the disposal of shares held by Luxembourg companies. Moreover, Luxembourg thin capitalisation rules are softer.

French tax authorities closely scrutinise the use of treaty country entities by non-treaty country residents, especially when they suspect these entities are being used to avoid French taxation. French authorities typically challenge structures where a non-treaty country resident routes income or profits through an entity in a treaty country, claiming treaty benefits like reduced withholding taxes or exemptions.

The main concern is whether the treaty country entity has substantial activities or is merely a conduit with little to no economic substance. If the French authorities determine that the entity lacks genuine business operations and exists primarily to take advantage of the tax treaty, they may deny treaty benefits and apply domestic tax rules, leading to higher tax liabilities for the non-treaty resident.

Authorities often investigate whether the entity has a sufficient operational presence, such as employees, decision-making capabilities and risk-taking functions, in the treaty country. If these elements are missing, the French tax office may disregard the treaty entity and tax the income as if it were earned directly by the non-treaty resident.

To mitigate risks, companies need to demonstrate that their treaty-based structures are compliant with both local rules and international anti-abuse provisions, such as the OECD’s principal purpose test (PPT).

The biggest transfer pricing issues for inbound investors operating through a local corporation typically include the following.

  • The determination of transfer pricing comparables, which consists of identifying appropriate comparables for setting arm’s length prices, is often difficult, particularly in industries with few local comparables or in markets that differ significantly from global norms. This can lead to disputes over the appropriate profit levels for the local entity.
  • The French tax authorities closely scrutinise the allocation of profits between a local corporation and its foreign affiliates. Ensuring that the local entity receives an appropriate share of profits, based on its functions, risks and assets (functional analysis), is a key challenge. Authorities may question whether too much profit is being shifted to low-tax jurisdictions.
  • There are transfer pricing documentation requirements that must be fulfilled, especially for companies whose turnover or total gross assets exceeds EUR150 million. For companies with turnover or total gross assets equal to or greater than EUR50 million, other limited documentation requirements are to be fulfilled. This documentation burden can be significant, and failure to meet local requirements may result in penalties or adjustments for companies.
  • There are tax audits where authorities review intercompany transactions and may impose retroactive adjustments. This can lead to higher tax liabilities and disputes that may be costly to resolve.

Careful planning and alignment with local and international guidelines, such as OECD standards, are crucial to mitigate these risks.

French local tax authorities challenge the use of related-party limited risk distribution (LRD) arrangements, particularly when they suspect that these arrangements are being used to shift profits out of France to lower-tax jurisdictions. The French tax authorities scrutinise whether the local distributor, operating under a limited-risk framework, is receiving an appropriate return given its role, functions and risks (functional analysis).

LRD structures, where a French entity acts as a low-risk distributor for a foreign parent company, are often questioned when the profits attributed to the French entity are perceived as too low relative to its operational activities. The authorities analyse whether the limited-risk distributor is genuinely assuming limited risks and functions, and whether its profit margins align with market comparables. Permanent establishment issues may also arise for the principal. To mitigate challenges, companies must maintain robust documentation, demonstrating that the terms of the LRD arrangement meet the arm’s length principle and comply with both French and international standards.

In France, local transfer pricing rules largely align with OECD standards, but there are a few significant variations in enforcement and application. In this respect, French regulations mandate robust transfer pricing documentation, going beyond OECD guidelines. France has specific requirements for maintaining both master files and local files, which provide detailed information about the global group and the local entity’s activities. Non-compliance can result in substantial penalties, including a percentage of the adjusted taxable income. In addition, in the context of tax disputes, the French tax authorities often place a high burden of proof on the taxpayer to demonstrate that their transfer pricing complies with the arm’s length principle (Article 57 or 238 A of the Federal Trade Commission (FTC) Act). The penalties for non-compliance are more severe compared to OECD recommendations.

It should be noted that French authorities place particular emphasis on transactions involving intangible assets and those perceived as shifting profits to lower-tax jurisdictions. They scrutinise whether French entities receive an appropriate share of profits related to intangibles, often challenging structures that shift intangible-related profits offshore.

While France’s rules adhere closely to OECD guidelines, the enforcement is strict, with a strong focus on ensuring compliance and preventing tax avoidance.

In France, tax authorities have become increasingly aggressive in enforcing transfer pricing rules, particularly in recent years. They are proactive in auditing multinational companies, often using new information – such as data from automatic exchanges, whistle-blowers or new tax filings – to reopen earlier years for review. This retrospective approach allows authorities to adjust past assessments, leading to higher tax liabilities and penalties.

International transfer pricing disputes are frequently resolved through double tax treaties (DTTs) and the mutual agreement procedure (MAP), or under the arbitrary convention. French authorities generally accept the MAP process, as it helps resolve disputes related to double taxation. However, the process can be time-consuming, and France tends to be cautious, particularly if the dispute involves aggressive tax planning or profit-shifting schemes. MAP cases are becoming more common as the number of transfer pricing audits and disputes rise.

In France, compensating adjustments are allowed when a transfer pricing claim is settled. These adjustments help align the tax treatment of the concerned parties based on the final settlement to ensure consistency with arm’s length principles. There are often issues with the tax authorities involved in the transaction, and statute of limitation problems may arise.

Taxation is very similar between local branches and subsidiaries of non-local corporations. It should be noted that a local branch (which is part of a foreign entity) is typically taxed only on the income sourced from France and is considered as a permanent establishment benefiting from a DTT. Depending on the localisation of the parent company, a branch tax may be due on the distribution made to the parent company.

A local subsidiary is considered as a separate legal entity and is subject to taxation on its worldwide passive income provided France has the right to tax such income under relevant tax treaties (with the benefit of tax credits). Regarding its trading activity, a French subsidiary is subject to French corporate tax only on the profits attached to the activity performed in France.

Capital gains realised by non-residents on the sale of shares of a French company can be taxed in France if the seller (company or individual), together with their spouse and ascendants and descendants, directly or indirectly holds more than 25% of the rights to the company’s profits at any time during the five years preceding the sale. Capital gains resulting from the sale of a predominantly French real estate entity pursuant to French tax law are also taxable in France.

These rules can be dismissed depending on the applicable DTT and the provisions on capital gains.

Tax (capital gain tax or stamp duties) could be due in France in case of transfer of shares of a foreign company directly or indirectly holding French property.

The margin realised by a foreign-owned local affiliate depends on the risks assumed. As an example, an affiliate acting as a distributor could realise a margin between 2% and 4%.

The service rendered by a non-local affiliate must be real and justified, and the management and administrative expenses must not be excessive in relation to the service rendered. Usually, a cost-plus method is applied. The cost-plus rate depends on the added value of the service rendered.

In some situations, the remuneration paid for services rendered by a company established in a low tax jurisdiction is not deductible from the taxable result of the local company.

Some constraints regarding the deductibility of interest exist for related parties, and anti-hybrid rules, also exist. Moreover, net financial expenses can only be deducted for up to 30% of tax-adjusted EBITDA per year, or EUR3 million if higher (for non-thin-capitalised companies). The rules applicable in this regard to thin-capitalised companies are more stringent.

No withholding tax is levied on interest paid from France unless this interest is excessive and a portion of it is recaptured on the occasion of a tax audit.

In France, pursuant to the territoriality principle, only profits realised by enterprises conducting business in the country are liable to CIT.

All expenses that are not in the interests of the local corporation will be non-deductible. Moreover, expenses that are linked to a permanent establishment of the French company outside France will not be taxable at the level of the French company.

A participation exemption regime (régime mère-fille) applies to dividends distributed by subsidiaries where at least 5% of their share capital is held by the parent company. Both the parent company and its subsidiary must be subject to CIT at the standard rate, and the parent company must keep the shares of the distributing company for at least two years (or commit to do so).

In this case, dividends are exempt from CIT but a lump-sum amount of 5% of the dividends distributed (including foreign tax credits), or 1% in certain specific cases, must be recaptured and is subject to the standard CIT rate of 25%. The effective CIT rate is therefore 1.25% (or 0.25% in certain cases).

Otherwise, dividends will be taxable at the standard CIT rate of 25% (for FY24).

If intangibles developed by local corporations are used by non-local subsidiaries, a license agreement must be concluded between the two entities.

The license agreement must provide fair remuneration for the use of the intangible. The remuneration will be taxed in France at a rate of 25% or 10% (if, with regard to the intangibles used, the optional IP box regime can be applied).

The French Tax Code provides for controlled foreign company (CFC) legislation aimed at dissuading French companies from storing their profits in foreign subsidiaries benefitting from a privileged tax regime. Foreign entities that are tax exempt abroad, or that benefit from an effective corporate tax rate 40% lower than the effective French tax rate, are deemed to benefit from a privileged tax regime.

Subject to conditions and the application of French CFC rules, the profits of a foreign entity are subject to French CIT even though they are not distributed.

A safe-harbour provision applies to entities established in the EU; in this case, the French tax authorities must prove that the foreign entity is an artificial scheme with a tax avoidance purpose.

When the entity is established outside the EU and benefits from a privileged tax regime, CFC rules will not apply if the French company is able to prove that the main purpose and effect of the establishment of the foreign entity is not to localise profits in a jurisdiction benefiting from a privileged tax regime.

The French parent company is deemed to receive fully taxable dividends from foreign subsidiaries in proportion to its participation in the latter or to direct profits from a foreign branch or establishment.

Safe-harbour provisions exist in specific cases.

There is no specific rule with respect to the substance of non-local affiliates, but the French tax authorities may try to challenge any abusive schemes based on the abuse of law principle.

Subject to the provisions of tax treaties, local corporations will be taxed on the sale of shares in non-local affiliates.

If the shares correspond to substantial participation, the disposal will be exempt from capital gains tax but a lump sum of 12% corresponding to costs and expenses has to be recaptured and taxed at a CIT rate of 25%, corresponding to an effective tax rate of 3%.

Otherwise, the capital gains linked to the sale will be taxed at a rate of 25%.

France continuously implements measures against tax avoidance, often through EU-driven reforms.

As an example, Article 57 of the French Tax Code provides that profits indirectly transferred abroad to controlled companies must be incorporated into the French company’s results.

Transfer pricing rules, based on the arm’s length principle and following the OECD guidelines, also apply in France.

Moreover, France has introduced anti-hybrid measures derived from the OECD’s EU Anti-Tax Avoidance Directive (ATAD 2). These rules neutralise the asymmetrical tax effects (deduction/non-inclusion, double deduction) caused by certain so-called hybrid arrangements resulting from differences between French law and the law of other states in relation to the qualification of certain financial instruments and/or entities, or to the attribution of payments.

There is no regular routine audit cycle in France. In practice, French companies are audited every three or four years (more regularly with respect to large groups).

Most base erosion and profit shifting (BEPS) recommended changes have been implemented in the French law system.

VAT on customer digital services (Action 1) has already been implemented in domestic law. Action 2 (regarding hybrids) has been implemented through domestic and European directives. The objectives of Action 3 in relation to the CFC are already met by existing CFC rules. ATAD I has been transposed in France to meet the objectives of Action 4 concerning interest deductions.

Concerning Action 5 against harmful tax practices, the OECD considers no harmful regime to exist. Also, in compliance with Action 5, France already exchanges information on tax rulings. The prevention of treaty abuse clause (Action 6) is implemented through a multilateral instrument (MLI). Permanent establishment status (Action 7) is implemented as part of the MLI. The objectives of Actions 8, 9, 10 and 13 concerning transfer pricing have been met. The objectives of Action 12 have also been met now that the DAC 6 directive has been transposed. Regarding the effective dispute resolution mechanism (Action 14), stage 2 thereof is being reviewed, and recommendations are being made. Finally, the BEPS MLI (Action 15) is in force.

The general stance of the French government is to comply with the BEPS project.

France actively supports Pillar One. Pilar Two has been transposed and is in force.

France is very vigilant with regard to international taxation (tax evasion) and very attentive to the BEPS recommendations with respect to avoiding tax evasion.

France is pushing for the harmonisation of the corporate tax rate to 25%. It does not favour an aggressive approach, but prefers to remain in line with other European countries such as Germany, Luxembourg and the UK. Generally, France does not intend to implement a highly competitive tax policy, unless to attract newcomers moving to France or to favour certain regions or industries.

For France, it is important that BEPS rules apply. France has agreed on a 15% minimum CIT rate.

Provisions regarding research tax credit might be more vulnerable than other areas of the French tax regime insofar as it is highly supervised, and many conditions have to be met.

Research tax credit is often subject to a tax audit. There are no incentive rules in France that derogate from EU rules.

The anti-hybrid provisions (ATAD 2) apply to financial years beginning on or after 1 January 2020. From now on, tax deduction in France of the payments, charges and losses of companies will be refused in the presence of a hybrid arrangement.

France has a territorial tax regime with tailored interest deductibility restrictions.

The French CFC rules, which are an exception to the territoriality principle, are not considered potentially defective.

As a general rule, Article L64 of the French Tax Procedural Code (FTPC) provides for the abuse of law theory, which allows the French tax authorities to disregard fictitious acts and acts seeking the literal application of texts or decisions for the purpose of avoiding or reducing the amount of taxes that the taxpayer would have normally paid. In this respect, where “abuse of law” applies, a tax penalty ranging from 40% to 80% of the avoided taxes may apply.

This anti-avoidance rule is frequently used by the French tax authorities in the case of foreign holding companies in order to disregard them from a tax point of view, where the Finance Law of 2019 introduced a new anti-abuse mechanism equivalent to the common abuse of law procedure (Article L 64 A du LPF). According to this new mechanism, the French tax authorities would be entitled to deny, as not opposable, arrangements mainly motivated by tax considerations (and not exclusively as provided by Article L64 of the FTPC). At this stage, it cannot be entirely ruled out that the French tax authorities will try to make extensive use of this new anti-avoidance rule in the future.

Insofar as French transfer pricing rules already referred to the OECD guidelines, some actions of BEPS have already been implemented into French tax law (Actions 8 to 10 and 13 regarding transfer pricing documentation).

Taxation of profits from IP at the preferential corporate tax rate of 10% requires French companies to be very rigorous and to prepare specific documentation.

The principle of tax transparency is the cornerstone of a degree of tax equality between countries and helps to avoid tax dumping to the detriment of countries such as France. For reasons such as this, it can be seen as a positive thing. However, tax arrangements put in place to encourage greater tax transparency (such as country-by-country reporting (CBCR), for example – a direct application) can result in an excessive administrative burden on companies, and implementation costs can also be high.

In France, a tax on digital services has been introduced. The tax on digital services is a contribution payable by digital companies carrying out three types of activities in France: targeted online advertising, the sale of personal data for advertising purposes and intermediation platform activities.

This tax is levied at a rate of 3% on the sales relating to these activities.

A tax on digital services has already been introduced in France.

France has provisions for taxing offshore IP used within the country. Under Article 155 A of the General Tax Code, these take the form of direct assessments on the IP owner rather than withholding taxes. France distinguishes between IP owners in tax havens and those in countries with DTTs, often applying stricter rules and higher tax rates to IP owners based in tax havens.

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Trends and Developments


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Cazals Manzo Pichot Saint Quentin is a premier independent law firm dedicated exclusively to taxation. With a team of approximately thirty highly skilled lawyers, including eight partners, the firm is recognised as one of France's foremost leading independent firms in tax law. Renowned for its deep expertise and client-centric approach, the firm provides sophisticated, tailor-made solutions across all areas of taxation. Its core strengths lie in wealth management, transactional taxation, corporate taxation, and transfer pricing. The firm advises prominent business leaders, management teams, high-net-worth families, major industrial and service groups, and leading financial investors such as investment funds and family offices. By adopting a cross-disciplinary methodology and fostering seamless collaboration among its partners, Cazals Manzo Pichot Saint Quentin excels in delivering innovative, strategic tax solutions. Its expertise spans the structuring of complex domestic and international transactions, real estate taxation, wealth taxation, executive advisory services, and high-stakes tax litigation.

International tax issues accounted for a substantive part of recent trends in corporate income tax in France.

Finance Law for 2025

As an introduction, it should be noted that the Finance Law for 2025 was eventually passed in February 2025 (and not before, due to the resignation of the former government). Further down, you will find some of the key measures that have been introduced.

Pillar 2

Pillar 2 rules were implemented into French tax law through the Finance Law for 2024. The Finance Law for 2025 introduced various technical adjustments to implement the latest OECD guidance, particularly regarding substance-based exclusion, top-up tax, transitional safe harbour regimes, and French Qualified Domestic Minimum Top-up Tax (QDMTT).

However, the latest guidance released by the OECD in June 2024 and January 2025 could not be integrated at this stage, and accordingly, the Pillar 2 French legal framework should be further adjusted in the future.

Exceptional contribution to the CIT

An exceptional contribution to CIT was introduced. It amounts to 20.6% of the CIT for companies with turnover higher than EUR1 billion and 41.2% of the CIT for companies with turnover higher than EUR3 billion. This results in effective CIT rates of 30.975% and 36.125%, respectively.

An instalment corresponding to 98% of the surtax shall be paid on the date scheduled for the advance corporate tax payment (due on 15 December for entities closing on 31 December 2025).

According to the law, the contribution is temporary and shall only apply for financial years ending on 31 December 2025 or later. It is worth recalling that the standard CIT rate has progressively decreased over recent years and is currently set at 25%.

Phase-out of the decrease of the property tax (CVAE)

The contribution to the added value of companies (CVAE) is a local tax computed based on added value. The phase-out of the CVAE that was voted on several years ago has been postponed for an additional three years (until 2030).

Levy on share buyback and share capital decreases

A levy is introduced on share buybacks (followed by a share capital decrease) made by French companies with a turnover higher than EUR1 billion. The levy amounts to 8% of the share capital decrease and associated premiums, applicable to buybacks made after 1 March 2025. A similar mechanism also applies to operations carried out between 1 March 2024 and 28 February 2025.

Withholding tax on dividend distributions

The regulations on dividend distributions were amended to strengthen anti-abuse mechanisms targeting arrangements that aim to avoid or reduce withholding tax.

  • The 25% withholding tax applies when the payment is made to a French company, but the beneficial owner is in another jurisdiction.
  • The current anti-abuse rules apply to temporary transfers or similar transactions of less than 45 days. The scope is extended to any agreement or instrument with a similar effect, and the 45-day criterion is eliminated.
  • Withholding tax also applies to dividend distributions made to beneficiaries resident in jurisdictions which concluded double tax treaties with France that do not provide for a withholding tax or exempt such income from withholding tax. However, beneficiaries can subsequently request a full or partial refund.

Other measures

Other measures introduced by the Finance Law for 2025 include:

  • an exceptional contribution levied on major shipping companies at a 12% rate for FY 2025 (where the volume of their sales is equal to or exceeds EUR 1 billion);
  • amendments to the tax-neutral merger regime, including new cases of mergers or spin-offs without share exchanges, as well as a new definition of partial de-mergers; and
  • implementing the DAC8 Directive, which relates to the automatic and compulsory exchange of information on digital assets, into French tax law.

Transfer Pricing

New regulations on transfer pricing

The transfer pricing legislation in France was already strengthened by the Finance Law for 2024.

Decrease of the transfer pricing documentation thresholds

Transfer pricing documentation requirements used to apply to French entities with gross assets or turnover exceeding EUR400 million (or that control or are controlled directly or indirectly by an entity that meets this criterion). This threshold has been lowered to EUR150 million.

Increased penalties for missing TP documentation

Penalties for missing or insufficient TP documentation have been increased from EUR10,000 to EUR50,000.

Binding nature of transfer pricing documentation

Transfer pricing documentation has become binding on a taxpayer. If the strict application of the transfer pricing policy provided by the documentation had resulted in a higher profit than the profit resulting from the transfer pricing policy that was actually applied, the difference should be deemed a transfer of profits.

This presumption is rebuttable, and the taxpayer can still demonstrate that the transfer pricing policy was applied at arm's length, but the burden of proof shifts to the taxpayer.

Transfer of Hard-To-Value Intangibles (HTVI)

France introduced provisions on HTVI (in line with the definition in the OECD TP Guidelines) into its legal framework. Accordingly, the French Tax Authorities ("FTA") are entitled to adjust the value of an HTVI transfer based on income realised after the fiscal year in which the transaction took place.

The statute of limitations for HTVI-related transactions is extended to six years (instead of three years), and the tax year can be audited several times for HTVI-related issues.

Mutual Agreement Procedures (MAP) and Advanced Pricing Arrangements (APA)

The department of the French Competent Authorities handling MAP & APA (bureau SJCF-4B) increased its staffing, and the number of concluded APAs doubled to 28 in 2023.

According to the OECD 2023 MAP & APA statistics, France received the award for the most improved jurisdiction through the closing of an additional 212 cases with positive outcomes compared to 2022 (reaching 500 MAPs, including 280 related to transfer pricing matters), with increases for both transfer pricing and other cases. In addition, together with Canada, France received the award for the pairs of jurisdictions that dealt the most effectively with their joint caseload for transfer pricing cases.

Additionally, the FTA revised its administrative guidelines to reflect updates regarding the application of the EU Directive on mutual agreement procedures.

Country-by-Country Report (CbCR)

Public CbCR rules were introduced into French tax law following EU Directive 2021/2101 dated 24 November 2021. They apply to tax years starting after 22 June 2024. Public CbCRs have to be made public within 12 months following the year-end. However, publication can be postponed for up to five years if public disclosure could cause significant economic harm.

New Double Tax Treaties (DTTS) Concluded by France

The new DTTs between France and Denmark (the former DTT was terminated in 2008), Greece and Moldova entered into force. The amendment to the France-Luxembourg DTT signed on 7 November 2022 entered into force at the beginning of 2025 and includes provisions related to teleworking.

France signed new DTTs with Finland, Cyprus and Rwanda. These DTTs have to be ratified by the French Parliament before entering into force. The new DTT with Belgium (signed in 2021) has not yet been ratified and may be subject to amendments. An amendment to the France-Switzerland DTT was signed on 27 June 2023 and requires the Parliament's ratification.

Negotiations are ongoing for the conclusion of DTTs with some jurisdictions that are not covered, such as Uruguay.

Conversely, France decided to suspend the application of the DTTs with Russia and Belarus (following these countries’ unilateral decisions to terminate their DTTs with France), as well as those with Mali, Niger, and Burkina Faso.

Relations Between Taxpayers and the French Tax Authorities

In 2019, the Government Reform Act for a Trust-Based Society (Loi pour un État au service d'une société de confiance (ESSOC)) introduced several measures to improve relations between taxpayers and the FTA and facilitate doing business in France. The following provides an overview of the application of these measures.

Tax Partnership Service

The Tax Partnership Service (Service Partenaire des Entreprises) is tailored to establish long-term relationships between participating companies and the FTA. The program is designed for companies involved in complex activities and transactions that seek greater certainty in handling tax matters, particularly issues involving significant amounts or risk.

Since its launch in 2019, the Tax Partnership Service has proven effective, with around 100 corporate groups participating (representing 4,500 entities). It offers a single point of contact with the FTA for clarification on French tax matters, expedited rulings and referrals to the appropriate FTA department.

The Tax Partnership Service can offer some level of confirmation on transfer pricing matters. However, complex cases and APA requests remain handled by the dedicated service at the FTA (Competent Authorities -SJCF-4B).

Notably, a specialised service exists for questions related to permanent establishments, and a new service, Tax4Business, has been set up as a one-stop shop for foreign investors.

Voluntary Compliance

A tax compliance service (Service de Mise en Conformité Fiscale) has been set up to enable taxpayers to voluntarily regularise situations that do not comply with French Tax Law. This is particularly relevant for undisclosed business activities constituting a permanent establishment, excessive interest deductions, or potentially abusive tax arrangements (eg, profit-shifting schemes, treaty abuse, or double interest deductions).

The voluntary regularisation procedure may reduce tax penalties, and the FTA encourages small and medium-sized enterprises to take advantage of this program.

Relations Between FTA and Foreign Tax Authorities

Joint tax audits

Joint tax audit procedures were introduced into French law by implementing EU Directive 2021/514 on Administrative Cooperation (DAC 7), which became effective in 2024. This directive concerns reporting obligations for platform operators.

The joint audit procedure sets a framework for tax agents to coordinate their participation in investigations in other jurisdictions and request documents. At the end of the audit, tax authorities must issue a final report summarising their findings and any agreed-upon conclusions. The advantages and challenges of joint audits must be assessed in light of the additional workload they may impose and the opportunities they present for eliminating double taxation (particularly in transfer pricing cases).

Exchange of information

The FTA regularly uses the information exchange procedure to obtain additional information during tax audits. Initiating this procedure may extend the statute of limitations for three additional years.

Trends in Case Law

Clarifications on beneficial ownership under DTTs

Several recent Conseil d’Etat (French Supreme Court) rulings clarified how beneficial ownership provisions are applied under DTTs.

In 2021, the Conseil d’Etat ruled that a UK company acting as an intermediary for royalty payments was not considered the beneficial owner because it merely determined payment amounts and retained only a nominal share for administrative costs and charitable contributions (Conseil d’Etat, 5 February 2021, No 430594 et 432845, min c/ Sté Performing Rights Society).

The Conseil d’Etat also clarified that DTT benefits could apply based on the beneficial owner's jurisdiction, even if payments were routed through intermediary entities in third jurisdictions (Conseil d’Etat, 22 May 2022, Planet). In the case at hand, a French entity paid royalties to Belgian and Maltese entities that merely acted as intermediary entities, whereas the amounts paid ultimately benefited an entity located in New Zealand.

In a recent case, the Conseil d’Etat added several clarifications on the application of the beneficial ownership provisions in a situation where a French entity made dividend distributions to a Luxembourg company, which immediately redistributed the amounts to its shareholders, including a German individual. The Conseil d’Etat upheld the position of the lower courts and stated that the Luxembourg company was not the beneficial owner of the dividends (Conseil d’Etat, 8 November 2024, No 471147 Vélizy Rose), based on the following factual and functional grounds:

  • factual grounds forming a set of indicators: the French distributing company was the sole asset of the Luxembourg company; the Luxembourg company distributed the full amount of dividends to its shareholders the day after it received it; and
  • functional grounds: the Luxembourg intermediate entity had no activity other than holding shares in the French entity.

Deduction of foreign losses (Marks & Spencer)

The possibility for French companies to deduct the definitive losses of foreign entities (a follow-up of the Marks & Spencer case) still raises various questions and has led to recent court decisions.

In particular, two administrative courts of appeal (Paris and Douai) rendered adverse decisions on this matter. In particular, the administrative court of appeal of Paris ruled that the losses borne by a foreign entity could not be deducted based on the French group tax rules, although the foreign entity and a French entity were in comparable situations. (CAA Paris, 22 May 2024, No 22PA02967, Société Générale). The Conseil d’Etat referred this case to the EU Court of Justice (15 April 2025).

It is also noteworthy that the Conseil d’Etat ruled that losses from foreign branches of a French company are not deductible in France if the applicable DTT exempts the branch’s income from French tax (CE, 26 April 2024, No 466062, SCA Financière SPIE Batignolles).

Transfer Pricing

Transfer pricing method departing from intragroup agreements

An administrative court of appeal ruled that the FTA were entitled to disregard a company’s transfer pricing method if it deviated from the method set out in its intragroup agreements (CAA Paris, 12 January 2024, 21PA04452, Itron). However, in this case, the FTA failed to demonstrate that the transfer pricing policy stipulated in the intragroup agreements should have resulted in higher profits for the French company. As a result, the reassessment was cancelled.

Lack of response following a request for information

An administrative court of appeal confirmed that when a company fails to provide sufficient information in response to an FTA request regarding its transfer pricing policy, the FTA can reject the method used by the company and apply the method they consider more appropriate to determine an arm’s length price (CE, 5 July 2023, No 464928, ST Dupont). In this case, the company’s argument regarding discrepancies between the comparables proposed by the FTA and those used by the company was dismissed, as it had not justified why such differences prevented a reliable comparison.

Valuation methods

The French Tax Authorities are putting increased scrutiny on the assumptions used for valuation purposes. In a recent case, the courts reviewed the determination of the market risk premium and rejected the position taken by the FTA (CAA Paris, 5 March 2025, 23PA03081, Seita).

Interest on shareholder loans

Under French tax law, the interest rate on loans granted by related parties is capped at an administrative rate unless the company can demonstrate that a higher market rate is applicable. The burden of proof thus lies with the taxpayer, and the FTA is often used to require the presentation of a bank offer. However, a 2019 decision by the Conseil d’Etat opened new avenues, stating that demonstrating compliance with market rates could also be achieved by comparing the interest rate to returns on bonds – provided such financing would have represented a reasonable alternative.

Recent court rulings have provided valuable guidance on determining credit ratings and selecting appropriate comparable bonds. In addition, other decisions have emphasised that assessing the arm's length nature of intragroup loan conditions should not focus solely on interest rates but also consider surrounding contractual terms, such as guarantees and other conditions.

Cazals Manzo Pichot Saint Quentin

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Jeantet was founded in 1924 and is the second-oldest independent French business law firm still active on the French market. Its reputation extends far beyond national borders, with operations in over 150 jurisdictions worldwide. For decades, the firm has been at the forefront of the legal scene, built around a dynamic and ambitious management team. Jeantet attracts talent, as evidenced by the increase in the number of partners to 41 over the past five years, and in the number of associates and support teams to over 200 experts today. Jeantet’s internationally recognised tax team advises companies, family shareholdings, investment funds and private banking establishments. It regularly works in the industry, food, real estate development, ultra-high net worth individual (UHNWI), entertainment, capital investment, luxury goods and champagne, merchant banking and private banking sectors.

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Cazals Manzo Pichot Saint Quentin is a premier independent law firm dedicated exclusively to taxation. With a team of approximately thirty highly skilled lawyers, including eight partners, the firm is recognised as one of France's foremost leading independent firms in tax law. Renowned for its deep expertise and client-centric approach, the firm provides sophisticated, tailor-made solutions across all areas of taxation. Its core strengths lie in wealth management, transactional taxation, corporate taxation, and transfer pricing. The firm advises prominent business leaders, management teams, high-net-worth families, major industrial and service groups, and leading financial investors such as investment funds and family offices. By adopting a cross-disciplinary methodology and fostering seamless collaboration among its partners, Cazals Manzo Pichot Saint Quentin excels in delivering innovative, strategic tax solutions. Its expertise spans the structuring of complex domestic and international transactions, real estate taxation, wealth taxation, executive advisory services, and high-stakes tax litigation.

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