The French Finance Act for 2014 and Amending Finance Act for 2013 were adopted by the French Parliament on December 19, 2013 and were enacted on December 30, 2013 [the “Acts”]. The core objectives of the Acts are to return the public finances to structural balance and to strengthen the fight against fraud and tax evasion. These objectives have mainly been implemented by increasing taxes borne by the largest companies.

The key corporate tax measures of the Acts are as follows:

• The temporary additional corporate income tax rate has been increased from 5% to 10.7%^[1]. This temporary surtax applies to enterprises or tax consolidations generating annual gross revenue in excess of €250 million;
• Entities operating in France will be subject to temporary exceptional solidarity contribution on high remuneration awarded in 2013 and 2014^[2]. The tax will apply to the portion of the gross remuneration in excess of €1 million (including wages, salaries, cash, in-kind, fringe benefits, director’s attendance fees, pensions, amounts granted as a part of compulsory or voluntary profit-sharing plans, grants of stock options, free award of shares, and equity warrants for entrepreneurs). The tax rate is 50% but it cannot exceed 5% of the gross revenue realized by an enterprise for the year during which the tax is due. This tax will be deductible for corporate tax purposes; however, it will not be deductible from the tax base for calculation of the temporary 10.7% surtax;
• Taxpayers exceeding certain thresholds will have to provide tax authorities with their consolidated accounts upon the opening of a tax audit to the extent they keep any such accounts. Taxpayers who fail to provide such accounts will be subject to a penalty of 0.5% of the turnover per audited tax period (as adjusted by any tax reassessments), with a minimum penalty of €1,500^[3];
• Details of any tax rulings from foreign tax authorities which have been obtained by associated companies is now required as part of the transfer pricing documentation^[4]. Note that a law against tax fraud and financial criminality, enacted on December 2013, includes other changes to transfer pricing regulations, notably an obligation to file a summary of their transfer pricing documentation within a six month period following the deadline to file corporate income tax returns;
• Interest expenditure on loans between related parties will only be deductible provided that the lender would be taxed, during the same tax year, on the amount of interest income received at a minimum rate of 25% of the standard amount of French income tax due (in practice, a minimum tax of 8.33% on such interest is required). If the lender is a transparent entity, this limitation only applies if the French borrower is related to the owners or shareholders of the transparent entity and the minimum tax rate of 25% is applied at the shareholder level (subject to certain conditions)^[5];
• Research and development tax credits can now be assigned to securitization vehicles. Currently, these credits can either be used to offset the corporate income tax liability of the relevant fiscal year and the following three fiscal years, after which any excess is refunded to the taxpayer; or monetized by being assigned to a financial institution under the so-called “Dailly” procedure. Furthermore, the computation of certain expenses eligible for the research and development tax credit is simplified with respect to personnel costs and intellectual property protection costs^[6];
• French listed real estate investment trusts (SIICs) remain exempt from the 3% distribution tax on dividend distributions on or after January 1, 2014. However, their dividend obligations have increased from 85% to 95% of profits deriving from rental activity and from 50% to 60% of profits deriving from real estate capital gains^[7];
• The temporary deduction of tax losses generated by a foreign permanent establishment or subsidiary of French small- or medium-sized enterprises is repealed^[8];
• Companies with a fiscal year ending on December 31 will have to pay their corporate tax balance by May 15, instead of April 15^[9];

[1] Applying during financial years ending between December 31, 2013 and December 30, 2015.
[2] For remuneration due in 2013 and 2014, the tax will be due on February 1, 2014 and on February 1, 2015.
[3] Starting with tax audits opened as from January 1, 2014. In practice, in accordance with French tax rules, this new requirement could concern financial years 2011, 2012, and 2013.
[4] Starting with financial years ending on or after January 1, 2014.
[5] Starting with interests booked during financial years ending on or after September 25, 2013.
[6] Starting with expenses incurred as from January 1, 2014.
[7] Starting with financial years ending on or after December 31, 2013.
[8] Starting with financial years ending on or after December 31, 2013.
[9] Starting with financial years ending on or after December 31, 2013.