10 April 2014
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Global Tax Alert
New French Premier
announces tax and payroll
tax stimulus package
Executive summary
On 8 April 2014, the newly nominated French Prime Minister announced a series
of measures to reduce unemployment and public deficit, during his General Policy
Statement before the National Assembly. The measures include a tax and payroll
tax stimulus package which would be implemented gradually over the coming
years, starting with the amended Finance Bill for 2014 (a draft of which should be
tabled before Parliament in early summer 2014). Together with the tax credit for
competitiveness and employment introduced at the end of 2012, the Government’s
objective is to reduce the cost of labor by €30 billion by 2016.
The key tax and payroll tax cut announcements affecting companies are summarized
below.
Detailed discussion
Progressive decrease of the standard corporate income tax (CIT) rate to 28% by
2020
The current standard CIT rate is 33 1/3%. It would be decreased in two steps, in
2017 and in 2020, to ultimately 28%.
Repeal of the temporary additional contribution to CIT in 2016
The temporary additional contribution to CIT for companies with a turnover
exceeding €250 million, introduced in 2011 at 5% of the CIT and recently increased
to 10.7%, would be abolished as of Fiscal Year (FY) 2016. Going forward, taking into
account the social contribution to CIT of 3.3%, the overall maximum CIT rate would
be of 34.43%,1 reduced to 28.92%2 by 2020.
Repeal of the social solidarity contribution over
three years
Companies with a turnover exceeding €760,000 are
currently subject to a social security contribution of
0.16% (including surtaxes) assessed on their turnover.
This tax would be progressively repealed over a period
of three years.
Repeal of numerous “small taxes” to reduce the
administrative burden of French companies
France currently imposes numerous sector specific
taxes with low yield for the French Treasury and which
are burdensome to administer. The French Prime
Minister announced that “several tens” of these taxes
would be abolished.
Payroll tax cuts
The French Prime Minister announced that employer
social security contributions (payroll taxes) in relation
to employees earning the legal minimum wage would
be completely abolished as from 1 January 2015.
He also announced that, for wages up to 3.5 times
the legal minimum wage, the family contributions (a
component of payroll taxes) would be reduced by 1.8
points on 1 January 2016.
Endnotes
1. Standard rate of 33.33%, increased by 3.3% social contribution.
2. Standard rate of 28%, increased by 3.3% social contribution.
2
Global Tax Alert
For additional information with respect to this Alert, please contact the following:
EY Société d’Avocats, Paris
• Claire Acard • Anne-Elisabeth Combes +33 1 55 61 10 85 [email protected]
+33 1 55 61 13 77 [email protected]
Ernst & Young LLP, French Tax Desk, New York
• Frédéric Vallat +1 212 773 5889 [email protected]
• Daniel Brandstaetter +1 212 773 9164 [email protected]
• Pierre-Eric Coquard +1 212 773 7318 [email protected]
Ernst & Young LLP, Financial Services Desk, New York
• Sarah Belin-Zerbib +1 212 773 9835 [email protected]
Global Tax Alert
3
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