Investing in France means being fiscally supported!
France has become the leading European destination for job-creating foreign investments, ahead of the UK and Germany. Lower taxes and increased tax incentives are part of the renewal of the French attractiveness. France’s strategy is clear: to maintain its position as the European leader for FDI by boosting technological and industrial innovation, simplifying administrative procedures, and pursuing its effort to gain competitiveness. Therefore, a persuasive approach is further confirmed by the 21 new investments, including many Nordic projects, announced during the latest Choose France initiative.
France, a friendly economy for foreign investors
France ranks first among OECD countries regarding public funding and tax incentives for R&D (OECD, 2021). Thereby, the French economy has experienced the most significant growth in competitiveness of all European countries since 2015 (OECD, 2021). In the bargain, France is also the country that has received the most industrial investment over the last 15 years (EY, 2021), thanks to its new tax environment.
Read more: France Attractiveness Scoreboard 2021
Initially created in 1983, then structurally modified in 2008 to take its current form in 2013, the research tax credit (presented below) has been protected for five years. For Emmanuel Macron, this “attractiveness validates the entire economic policy; it is the result of all the reforms that have been carried out” in terms of taxation.
Indeed, foreign companies are encouraged to invest in innovation in France, and it works! Several Nordic companies have then recognized the dynamism of the French economy in recent years. Furthermore, they will continue to support France in 2022 such as:
- Ikea (€650 million over three years, focusing on the circular economy and sustainable transport);
- Ericsson (300 jobs by 2023 in R&D to accelerate the development of 5G in Europe);
- AstraZeneca (€500 million investment and 120 jobs created to develop the company’s industrial program);
- Norske Skog (€260 million investment and 50 jobs), or Tetra Pak (€100 million investment and 40 jobs).
Tax incentives to keep the trend going!
Throughout the five-year term, corporate environment tax in France has been considerably reduced to encourage investment and facilitate economic recovery. Firstly, the corporate tax, which was 33%, has been progressively lowered since the 2018 Finance Act to reach 25% in 2022. This tax is an annual tax on the profits made in France by companies. Secondly, by 2021, the government lowered the tax rate to 26.5% for most companies and 27.5% for companies with a turnover exceeding €250 million. In other words, the 25% tax target brings France closer to the European average. In any case, companies calculate and pay corporate tax in 4 installments on 15 March, 15 June, 15 September, and 15 December.
In addition, tax incentives complement tax reductions in the new tax environment in France. For example, companies can benefit from a tax credit for deducting R&D expenditure of 30% up to €100 million and 5% beyond. The activities concerned by the research tax credit (in French: crédit d’impôt recherche, CIR) are research and development activities (fundamental research, applied research, or experimental development). The research expenses must correspond to research operations within the European Economic Area (EEA), including the Nordic countries. Moreover, the CIR is deducted from taxes due by the company. As part of the administrative simplification and dematerialization, the procedure for obtaining this tax credit is available on the French tax portal. Specific aid is also available for new innovative start-ups and new companies created, according to the territory in which they are.
Securing your investments in France with Tax4business
Setting up in a new country is never easy. Besides, companies become eligible for public funding programs when they open a legal entity in France and hold a bank account. They also become subject to the French tax system. Firstly, what are the main features of the tax system? Secondly, what are the existing tax credits or deductions? Thereby, to assist them in their efforts and provide them with a reliable and official answer, the tax authorities have created the Tax4business service. Indeed, it enables all foreign investors to learn about national and local taxation. In other words, managed by the Public Finances Directorate (DGFiP), Tax4business is a single point of contact able to respond, in any language, to the main concerns and needs of investors.