Late payment of income tax, social security contributions, council tax, property tax and wealth tax is subject to a 10% surcharge, in accordance with article 1730 of the French General Tax Code. Are companies, especially SMEs, aware that this penalty could put them at risk?
Penalties to compensate the State for its losses
Regardless of the type of taxation chosen (corporate or income tax), companies are bound by the same rights and duties as other taxpayers, namely to declare and pay their taxes on time.
Any delay in payment, i.e. failure to pay or late payment of taxes or contributions, gives rise to the application of a 10% surcharge. The purpose of this penalty is to encourage taxpayers to pay their taxes on time, and also to compensate the State for the financial loss incurred.
More specifically, the surcharge applies if the company has not paid its tax within 45 days of the date of assessment, and to the payment of installments that have not been paid by the 15th of the month following the month in which they became due.
Late payment interest is added to the 10% surcharge. Since January 1, 2018, its rate has been set at 0.2% per month, or 2.4% per year. This interest applies until the last day of the month in which the tax return is filed.
What does this mean for companies?
Certain surcharges can be very penalizing, especially for small businesses. For example, if the apprenticeship tax is not paid on time, the amount is increased by 100%.
The most inequitable of these is the surcharge on the "participation à l'effort de construction" provided for under article 235 bis of the French General Tax Code. The "participation des employeurs à l'effort de construction" (PEEC), also known as the "1% housing scheme", is an investment made by employers in employee housing. Employers subject to this obligation must devote a minimum of 0.45% of remuneration paid for the year N-1 in the form of investment in housing construction by December 31 of year N. In the event of non-compliance with this obligation or late payment, the contribution is increased to 2%, a surcharge 34 times higher than that applicable to late payment of a direct tax.
Unaware of these risks, companies can quickly see their business jeopardized, even though they may have only committed an involuntary fault. For its part, it is in the State's interest to align these restrictive tax rules with article 1730 of the CGI, in order to maintain tax compliance.