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Corporate income tax: flexibility for companies in difficulty

Posted on March 04, 2020 by Pierre Belhache - 3 mins reading time
Banking watch Tax
The French Ministry of the Economy and Finance is keen to support companies facing cash-flow problems as a result of the health crisis, and has announced that they will be able to benefit from a flexible arrangement for paying the first instalment of corporation tax. Here's a closer look at these payment facilities.

First interim payment based on fiscal year 2020

As the March 15 payment date for the first instalment of corporate income tax approaches, the French Ministry of the Economy and Finance has informed companies in difficulty that they may benefit from cash facilities.

Companies wishing to do so will be able to pay a first instalment corresponding to 25% of the forecast tax, based on the 2020 tax year rather than 2019 as is usually the rule. For many companies, this means that they will pay less tax than they should have, as their results will have been lower in 2020 due to the health crisis.

In addition, a 10% margin of error will be tolerated, and the same flexibility will be granted for social security payments. The amount of the second installment, due on June 15, 2021, must be sufficient to ensure that the sum of the two installments represents at least 50% of the corporate income tax due on the basis of the 2020 tax year.

Tax credits and corporate tax cuts

This flexibility is available to all companies, including the largest, with at least 5,000 employees and sales in excess of €1.5 billion. They must, however, have fulfilled the commitments made to benefit from the various government support schemes, such as not having bought back shares or paid out dividends.

The Ministry of the Economy and Finance has also decided to extend the accelerated repayment of corporate tax credits. Companies eligible for the scheme in 2021 can now request repayment of the balance of the refundable claim, without waiting for their income tax return to be filed.

All tax credits repayable in 2021 are covered by this accelerated repayment procedure:

  • the competitiveness and employment tax credit (CICE),
  • research tax credit (CIR),
  • but also the lessor's tax credit,
  • or the energy renovation tax credit for SMEs, which has been in place since the start of the health crisis.

Finally, another signal of support for companies hit by the crisis: corporate income tax is being cut.

  • The rate rises to 26. 5% for companies with sales of less than €250 million,
  • and 27. 5% for companies with sales of €250 million or more. These new rates will apply from March 15.