Tax changes to French business in 2018 how will it affect you

From January 1st, the French government are ringing in the new year with some changes to business – so how will it affect you and your French business in 2018? Below is a quick-look guide to what’s happening with taxes, credit rates and pension funds.

Decrease in the corporate income tax rate & CICE tax credit rate

The great news is that the business-friendly president Emmanuel Macron has decided to help the French business owner by decreasing the corporate tax rate. So from 2018, the French corporation tax rate goes from 33.3% down to 28%. All companies will benefit from this corporate tax rate (IS) of 28% on profits below 500,000 euros.

Related article: What happens during a French company audit?

Also, the rate of the tax credit for competitiveness and employment (CICE) decreases from 7% to 6% from 1st January 2018. This reduction applies to wages paid during the year 2018. In 2019, the CICE will be replaced by a decrease in social charges.

Pay slips, social security contributions & payroll tax

The old style of payslip was a jumble of columns and figures that made little sense to an employee, so this year the government has decided to streamline the system and put a new payroll system in place. All employers need to comply with this simpler system which is designed to make it easier for an employee to understand where all their hard-earned cash is going. Although, bringing in a new system always has its teething problems, so even though employees will benefit, it may take a bedding in period for the employers to wrap their heads around the changes.

Related article: How does the payroll system works in France?

Both employers and high earning employees need to note that the higher rate of payroll tax on the fourth range of the current scale (income over € 152,279) is abolished as from 1 January 2018. Also, the social security contributions (CSG) increased by 1.7% on all business income, investment income and capital income but employee contributions decrease in two stages, on January 1st and October 1st, 2018.

Affiliation to the Agirc-Arrco supplementary pension fund

New companies will be pleased to know that unlike before, they will now be exempt from the obligation to join a supplementary pension fund. The Agirc-Arcco supplementary pension plan registration will only be required when the company hires its first employee.

Micro-enterprise turnover threshold, RSI & cash registers

Great news for self-employed people. Starting in 2018, the revenue caps for access to the micro-enterprise regime are doubled. In previous years, self-employed people under the micro-enterprise scheme had their turnover threshold capped at 82,000 euros, but the threshold has now been increased to 170,000 euros.

This change is for companies whose main activity is the sale of goods, objects, and local take-away food, or the provision of accommodation such as hotels, bed and breakfasts, country cottages and furnished accommodation. For companies dealing in services relating to industrial and commercial (BIC) or non-commercial (BNC) profits the threshold has been raised from 33,200 euros to 70,000 euros.

Related article: How to start a holiday cottage business in France

There will also be a gradual disappearance of the independent social regime. The independent social plan (RSI) is now entrusted to the general scheme organisation, but a self-employed or independent entrepreneur will maintain their own rules and rate of contributions.

Also, as part of the fight against tax fraud, from January 2018, all professionals using cash registers and tills can only use government certified cash systems, so that data cannot be altered. This might cause some initial upheaval but having everyone on the same page will ultimately make the system smoother and weed out the dodgy business people who are trying to get out of paying their taxes.

We’ll endeavour to keep you up to date with any more changes in the French business system, but in the meantime if you need any information on how to start a business in France, open a business bank account or if you need advice on tax planning, payroll or accounting services, just call us on+33 (0) 1 53 57 49 10 or email us via our contact page.

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