French flexicurity – Part 4: tax reforms

President Macron engaged in 2018 a series of reforms to transform and modernize the French taxation system, increase France’s attractiveness and make French companies and companies based in France more competitive. In his report “France Flexicurity”, Edward Hamilton analyses the tax reforms undertaken to bolster the business environment.

A series of tax reforms to improve France’s competitiveness

The tax reforms undertaken by Emmanuel Macron aims at creating a new tax environment in France, encouraging investments and boosting employment. The 2018 French Government Budget Act, therefore, reduces business taxation through various measures that benefit all companies by giving them the means to increase their competitiveness.  

• The reform decreases sharply the rate of corporate tax (Impôt sur les sociétés – IS), from 33.33% to 25% by 2022, in line with the European average.  
• The wealth tax on total assets (Impôt de solidarité sur la fortune – ISF) has been replaced by the property wealth tax (Impôt sur la fortune immobilière – IFI), which sees the tax base restricted to the value of real estate assets. 
• In terms of personal taxation, a single capital gains tax rate of 30% has applied from 2018 (Prélèvement forfaitaire unique – PFU). 
• A permanent reduction in social security contributions of six percentage points on low salaries.  
• The research tax credit, a key measure, allowing 30% of R&D expenditure to be deducted up to €100 million, and 5% above this threshold has been made permanent for this period of government. 
• The French government budget bill for 2019 provides for a supplementary depreciation measure for SMEs, who can deduct 40% of the original value of goods acquired between January 1, 2019 and December 31, 2020, for items such as machines, sensors, software or equipment for robotization and the digitalization of industrial activity.