Lower production taxes: what consequences for companies?
The government has forecast an impact of 10 billion euros over 2021 from measures to reduce so-called production taxes, i.e. certain local taxes. What does this reduction, provided for in the economic stimulus plan and implemented by the 2021 budget law, consist of?
Even with the previous reforms of 1998 and 2010, production taxes have been the subject of many criticisms. In addition to their transparency, they are criticized for being an impediment to investment and the establishment of companies in France because their assessment bases are independent of the profits made by companies and affect "more particularly industries exposed to international competition, such as the industrial sector". In 2018, these taxes represented 77 billion euros in France, or 3.2% of GDP, compared to an average of 1.6% in the European Union and 0.4% in Germany.3 These taxes are aimed at: the territorial economic contribution, which is a tax on the production of goods and services, and the tax on the use of energy.
These taxes are: the territorial economic contribution ("CET"), composed of the business property tax ("CFE") and the business value added tax ("CVAE"), as well as the property tax on built-up areas ("TFPB"). The possibility of a reduction in the social solidarity contribution of companies (C3S) has been ruled out.
Reduction of the CVAE by half, strengthening of the CET ceiling
Starting with the taxes due for 2021, the CVAE tax rate is reduced by half for all companies to 1.5 percent. The maximum rate will be reduced from 1.5% to 0.75% for companies with revenues of more than €50 million before tax. In concrete terms, this reduction will result, first of all, in a halving of the CVAE installments due in 2021.
In addition, several "accompanying" measures have been voted :
In order to avoid that part of the gain from the CVAE reduction is neutralized by the mechanism of capping the CET according to the value added, the rate of capping is lowered from 3% to 2%.
The additional rebate automatically applied to companies with a turnover of less than €2m is divided by two , as is the minimum flat-rate CVAE contribution applicable to companies with a turnover of more than €500k.
For installments due as of 2022, the obligation to pay the CVAE in installments will henceforth concern all companies whose CVAE for the year preceding the year of taxation is greater than €1,500.
The rate of the additional tax on the CVAE has been raised from 1.73% to 3.46%, calculated on the amount of the CVAE .
A reduction in the CFE and property tax for industrial establishments
For CFE and TFPB purposes, the tax base of most industrial establishments is determined using the so-called "accounting" method. This method is based on the application of interest rates to the cost price of the various elements (building, land) of the establishment, deterring many companies from investing in their production facilities.
These rates have now been divided by two ( from 8% to 4% for land and from 12% to 6% for buildings and installations), allowing a significant reduction in the CFE and the property tax due by these establishments.
This reform will have an impact on the advance payment due on June 15, 2021, which will be 25% of the 2020 CFE (and not 50%).
Establishment creation or extension: application of a potential exemption from CET for 3 years
In order to stimulate investments, upon decision of the local authorities benefiting from the tax, the creation and extension of establishments as of January 1, 2021 may be exempted from CFE and CVAE for three years.
The notion of "extension of an establishment" is subject to a new definition. It now makes it possible to offset changes that are unrelated to real estate work and to defer by three years the entry into CET taxation of new real estate investments by companies.
This exemption is contingent on the adoption, by the communities concerned, of a deliberation in this sense taken before October 1 for the following year and on the express request of the taxpayer. In this context, it applies for a period of 3 years starting from the year following the year of the establishment creation or the second year following the year during which the establishment extension took place (the reference period used to calculate the tax being the second last year preceding the year of the taxation).
In practice, subject to a deliberation of the communities before October 1, 2021:
In the event of the creation of an establishment in 2021, for 2021 exemption by right (the year of opening being exempt) and for 2022, 2023 and 2024, exemption subject to a request for exemption being sent to the EIS to which the establishment belongs using form 1447 C before January 1, 2022;
In the case of an "extension" of an establishment carried out in 2021, for 2023, 2024 and 2025, by deliberation, exemption subject to the submission to the EIS to which the establishment belongs of an application for exemption via form 1447 M before May 1, 2022.