The 2021 Finance Bill (FB) and tax measures: on the road to recovery for the French economy?

The French government has just published its budgetary guidelines and contemplated tax measures for 2021

The 2021 FB incorporates the measures announced on 3 September 2020 in the “France Relance” stimulus package, concerning the estimated €10 bn per year reduction in taxes on production:

• a 50% reduction of the contribution on the added value produced by businesses (CVAE), for all companies subject to this tax (2021 FB, art. 3;
• a 50% reduction of the property taxes on industrial facilities, for roughly 32,000 companies operating 86,000 facilities (2021 FB, art. 4);
• a lowering of the cap on the territorial economic contribution (CET), from 3% to 2% of the taxpayer’s added value, in order for the cap not to neutralize all or part of the benefit derived from the CVAE and property tax cuts (2021 FB, art. 3).

Regarding the taxation of businesses in France, the draft bill features only two measures, which are both justified by the current economic crisis caused by the Covid-19 pandemic:

• optional and temporary neutralization of the tax consequences of asset revaluations (2021 FB, art. 5): The effect of this cash-flow measure is to limit the tax impact of such operations in the context of Covid-19; it will not, in the end, result in any loss of revenue for the State.
• reinstatement of the mechanism for spreading out capital gains on the sale of a building under a sale-leaseback transaction (2021 FB, art. 6): under this measure, the taxation of capital gains on the sale of a building in a sale-leaseback transaction could, upon election, be spread out over the term of the leasing agreement in order to facilitate the refinancing of companies impacted by the consequences of the health crisis and help them restore their cash flow.

Regarding the taxation of individuals or their assets: absolutely nothing to report!

Regarding VAT, the FB for 2021:

• clarifies the VAT rules applicable to composite offers (2021 FB, art. 9);
• confirms the postponement of the entry into force of the rules modifying the VAT regime for e-commerce (PLF 2021, art. 10);
• transposes the VAT group regime into French law (2021 FB, art. 45).

It is hoped that, during the upcoming debates, the members of French parliament will strengthen this bill by taking the economic and fiscal actions needed to boost and support the rebound of our economy.

We will be following them closely and will of course keep you informed!