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The Finance Bill for 2014
The French Finance Bill for 2014 provides for an increase of the CIT rate and a prohibition of the deduction of certain financial expenses (especially interest on hybrid instruments). Taxand France discovers how these two updates will affect multinationals.
Increase of the corporate tax rate (CIT)
Two additional contributions have to be added to the French CIT rate (33.1/3%):
- A social contribution of 3.3% of the CIT (subject to certain exceptions)
- An exceptional contribution of 5% of the CIT for companies which have a turnover over 250 million of euros
Pursuant to the Finance Bill for 2014, the exceptional contribution increase from 5% to 10.7%, so that the effective CIT rate amounts to 38% starting from the fiscal period ending on or after 31 December 2013.
Prohibition of certain financial expenses
Interest paid to related companies will no more be deductible if the interest income is not taxed at the lending company’s level at a rate at least equal to 25% of the French CIT. This prohibition should be applicable starting from the fiscal period ending on or after 25 September 2013.
Also published in Thomson Reuters' Taxnet Pro, 9 January 2014
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