Share with your friends

France: Possible corporate tax changes expected in Finance Bill, 2019

France corporate tax changes possible in 2019

The French government is expected, in coming days, to submit a draft of the Finance Bill for 2019.


Related content

Based on current understandings, the following corporate tax items could possibly be included in the draft bill.

Tax group regime

  • The exemption available for capital gains realized on disposals of substantial shareholdings between tax consolidated companies would be repealed. In response, the 12% “recapture” percentage (representing the costs associated with the disposal) would be reduced to 5%.
  • The rule providing for “neutralization” of financial debt waivers involving tax consolidated companies would be repealed.

Implementation and transposition of ATAD 1 into French law

Interest deduction rules

France has obtained a derogation from the European Commission to allow France to postpone from 1 January 2019 to 1 January 2024, the implementation and transposition into French domestic law of the Anti-Tax Avoidance Directive (ATAD 1) provisions relating to interest deductions. However, it would appear that the implementation rules could be addressed by the 2019 Finance Bill (with a possible effective date of 1 January 2020).

French thin capitalization rules, as provided by Article 212-II of the French tax law, would be replaced by the ATAD 1 restriction (i.e., limiting the net financial expenses paid to both related and unrelated parties to 30% of the earnings before interest, tax, depreciation and amortization (EBITDA) if such expenses exceed €3 million). 

  • In the case of a tax consolidated group, these amounts would be determined at the level of the tax group.
  • The portion of EBITDA not used during a given fiscal year (FY) would be reported for five years; financial expenses not deducted in a given FY could be reported without any time limit.
  • As currently available under Article 212-II, a “safe harbor” clause would be introduced.
  • The current debt-to-equity ratio of 1.5:1 could possibly remain in effect, with the consequence of a “too thin capitalization” possibly resulting in a reduction of the 30% EBITDA cap to 10%. 
  • The general “haircut” (recapture of 25% of the net financial expenses) would be repealed, as would the “Amendement Carrez” rules (which required the French acquirer of qualifying participations, or a French or EU related entity, to exercise a control over the acquired company), thereby simplifying how taxpayers structure their transactions and deals.

French patent box regime

Provisions under the currently taxpayer-favorable patent box regime would be restricted or made more stringent in order to comply with Action 5 of the base erosion and profit shifting (BEPS) project. 

KPMG observation

Tax professionals caution that while these items could be among the possible measures included the government’s tax proposals, they could be subject to amendments and changes during the legislative process as the bill is taken up by the Parliament.

Individual tax, wage withholding

In another matter, the prime minister clarified and confirmed that the individual (personal) income tax will be withheld on earnings and wages paid to individuals by their employers, effective 1 January 2019.

For more information, contact a tax professional with Fidal* in France or with the KPMG member firm in France: 


Olivier Ferrari | +33 1 55 68 14 76 |

Gilles Galinier-Warrain | +33 1 55 68 16 54 |

Laurent Leclercq | +33 1 55 68 16 42 |

Bruno Bacrot | +33 1 47 38 89 96 |

Patrick Seroin | + 33 (0) 1 5568 4802 |


* Fidal is a French law firm that is independent from KPMG and its member firms.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal