French Finance Bill 2024: What’s new in Trade Tax, Transfer Pricing and Tax Audits in France?
The horizon of 2024 holds promises of economic and tax advancements, as the Finance Bill introduces a visionary and progressive suite of measures to foster growth and address contemporary challenges. Thoughtfully drafted against a backdrop of economic and social transformation, this new legislation sets out strategic orientations with the goals of enhancing competitiveness, fostering innovation, and ensuring a more balanced tax system. Through a series of provisions, it aims to stimulate investment and promote employment, while reaffirming a strong commitment to environmental and social issues. The following highlights provide updates on the Trade Tax (CVAE), transfer pricing audits, and tax audit procedures.
ARTICLE 8: Adjustment to the abolition of the Trade Tax (CVAE)
In an effort to enhance the competitiveness of businesses, a substantial reduction in production taxes has been initiated since 2021, resulting in a decrease of nearly €14 billion. As of 2021, property taxes on industrial establishments have been halved, and the tax rate for the Trade Tax (CVAE) has witnessed its first-ever reduction. Then, in 2023, the CVAE has been phased out, with a further halving of its rate.
In line with the objective of balancing the imperative to maintain control over public finances with the continual reduction in production taxes, this article outlines a four-year plan for the gradual elimination of the remaining CVAE.
The maximum CVAE tax rate Is consequently adjusted to 0.28% in 2024, 0.19% in 2025, 0.09% in 2026 until the full abolition of CVAE in 2027. The capping rate for the value-added territorial economic contribution (CET) will also be gradually lowered over four years. The rate of the additional tax on the CVAE allocated to CCI France has been adjusted to ensure that resources align with the needs of the CCI network. Additionally, this article mandates the abolition of the minimum levy on business value added from 2024 onwards, resulting in approximately 300,000 businesses no longer being subject to the CVAE.
ARTICLE 22: Strengthening Transfer Pricing controls for multinational companies
The purpose of this article is to fortify the tax authority’s abilities in identifying and penalizing the misuse of transfer pricing rules, aligning with the initiatives announced in the strategy to combat various forms of public finance fraud.
Focused on large companies, this article revises the threshold triggering the obligation to submit full documentation of transfer pricing policies at the commencement of a tax audit. Il also adjusts the fine for non-compliance with the submission of such documentation and ensures the enforceability of the documentation submitted by the company.
It also extends the time frame within tax authorities can recover intangible asset transfers and creates a new exception to the guarantee of non-renewal of an accounting audit in this context. This enables the Directorate General of Public Finances (DGFiP) ) to fully apply the rules defined by the Organization for Economic Cooperation and Development (OECD) for controlling the prices of such transfers.
ARTICLE 23: Arrangements for carrying out tax audits
The main objective of this article is to improve the material conditions surrounding external tax audits and reinforce the security of tax officials when faced with potentially aggressive behavior of taxpayers. To achieve this, the initial step involves amending articles L13 and L14 A of the French Tax Code (LPF), which govern accounting audits and audits of non-profit organizations.
Under article L13 I of the LPF, tax administration officials are mandated to conduct on-site audits of the accounting records of taxpayers obliged to keep and present accounting documents. According to jurisprudence, the audit may occur off-site at the taxpayer’s request, without this option being open to the tax authorities. However, the obligation to carry out the audit on the company’s premises becomes inappropriate when the premises’ situation or configuration hinders the audit’s execution in optimal conditions or poses a potential threat to the safety of the administration’s agents. Without questioning the principle that inspections typically occur on the company’s premises, the proposed amendment is designed to authorize the authorities to take the initiative of relocating the inspection. The location would be determined in agreement with the taxpayer or, failing agreement, the inspection would take place on the administration’s premises.
This possibility is also proposed for the checks outlined in article L14 A of the LPF, to ensure that documents issued by organizations receiving donations and payments, such as receipts and attestations, clearly indicate to taxpayers their eligibility for tax reductions under articles 200, 238 bis and 978 of the French General Tax Code.
Secondly, a proposal is made to ease the conditions under which public finance officials may be authorized to perform their duties anonymously, particularly in situation where revealing their identity may pose a risk to their life, physical well-being, or that of their relatives.
Under current law currently, only the director of the decentralized or national department overseeing a public finance officer has the authority to approve the replacement of their first and last name with an administrative registration number. Given the absence of a signature delegation mechanism, the implementation of the anonymization system may be delayed or even rendered impossible, if the director is unavailable. The proposed amendment therefore aims to introduce a delegation mechanism to enhance the flexibility of implementing the anonymization system.
If you have further questions, our accountants will be happy to provide you with personal advisory. Additionally, we are available to advise you throughout France and Germany by phone and video conference. Your Franco-German tax consultancy FRADECO.
Disclaimer
Although the greatest possible care has been taken in the preparation of this newsletter, we reserve the right to make changes, errors, and omissions. The abstract legal presentation in this newsletter is no substitute for individual civil and tax law advice on a case-by-case basis. Subsequent changes to the legal framework, the views of the German or French tax authorities or case law, including with retrospective effect, are possible.