France: Taxation in France - Indirect Taxes

Last Updated: 17 March 1995

Value Added Tax
Value added tax (VAT) is a multi-stage, non-cumulative tax on consumption. An entity computes the tax liability based on the month's sales and deducts VAT paid on purchases of goods and services. Except for exports, farm products, second-hand sales, certain banking and financial activities, and exempt goods and services, all deliveries of goods and performance of services for which remuneration is received are taxable if carried out in the course of business. Operations such as renting unfurnished property, providing financial or medical services, insuring or reinsuring are exempt. Any taxable good imported into France from a non-EU country is subject to French VAT as it enters customs.

Since 1 January 1993, intra-community sales of goods are treated as taxable acquisitions in the destination state. "Intra-community acquisition of goods" shall mean acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods by or on behalf of the vendor or the person acquiring the goods to a Member State other than that from which the goods are dispatched or transported. Between VAT taxable persons notably, VAT is paid in the destination member state at the VAT rate in effect for the destination member state. To avoid French VAT on an acquisition, the acquirer must communicate to the seller its VAT identification number. For that purpose, under the intra-community system, a VAT identification number is assigned to each company subject to VAT.

Tax rates are set forth in the following table.
Category 	Rate (%)
Reduced rate 	5.5
Standard rate 	18.6
Company Car Tax
A non-deductible tax is payable on all cars owned or used by companies. The amount of tax is based on engine size.

Payroll Tax
At present, few employers are subject to payroll tax. It applies only to employers with revenues that are not subject to VAT.

Tax on Real Property
Whether organised in France or abroad, legal entities that maintain their principal office outside of France and that own real property in France or rights to such property may be subject to a 3% tax on the property's value. Certain significant exemptions apply, however. The main exemptions are granted to companies that file a declaration or agree to provide, at the administration's request, certain information concerning the shareholders of the company.

Excise Taxes
Excise taxes at various rates are levied on tobacco, alcoholic beverages and fuel.

Customs Duties
Customs duties are based on EU rates for goods imported from countries outside the EU.

Registration and Transfer Taxes
The following activities are subject to registration tax:

- The sale of professional property is generally subject to registration tax at a standard rate of 16.60%, plus a local tax that varies by region. A reduced rate of 5.40% plus the regional tax applies to sale of dwelling property.
- The sale of shares in an SARL are subject to a 4.8% registration tax payable by the buyer. No tax is payable on the sale of stock in an SA if the deed of sale is not signed in France, otherwise a 1% tax limited to FF 20,000 is payable.
- The sale of goodwill and leasehold rights, which includes customer lists and trademarks, are subject to a registration tax of 7% in excess of FF 150,000 up to FF 700,000 and 14.20% over FF 700.000.
- Initial capital issues are subject to a fixed FF 500 registration tax.
- The sale of patents is subject only to a nominal registration tax of FF 500, regardless of whether the patents are used by the owner.

In certain circumstances (such as contributions to companies), special taxes are levied on transfers of property at 11.40% and on transfers of goodwill, customer lists and leasehold rights at 8.6% below FF 150,000, 9.6% between FF 150,000 and FF 700,000 or 11% above FF 700,000). The special taxes also apply to both initial capital subscriptions and additional capital increases if a legal entity not subject to corporate income tax transfers assets to increase the capital of an entity subject to corporate income tax. The rate applicable to contributions of goodwill is reduced to FF 500 if the contributors agree to hold the shares received for the contribution for at least five years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. For additional information contact Pierre Knoepfler on +33 (1) 46 93 70 00.
© Business Monitor 1995 Tel +44 171 820 7733.

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