French Amending Finance Bill for 2020

Corporate Income Tax

Article 1 – Tax exemption of sums paid by the Solidarity Fund

The Solidarity Fund provides temporary support to companies in sectors most affected by the COVID-19 epidemic.

Beneficiaries: independent companies regardless of their legal status, with fewer than 10 employees, a turnover of less than €1 M and an annual taxable profit of less than €60,000.

Conditions:

• Companies that have been closed by decision of administration or that belong to a particularly affected sector; or
• Loss of turnover of more than 50% in March 2020-April 2020 compared to March 2019 – April 2019.

Amount:

• Up to €1,500 (paid by the French tax authorities);
• Up to €5,000 in additional aid for the companies facing the greatest difficulties (paid by the Regions).

The Amending Finance Bill[1] provides for the exemption of these aids from Corporate Income Tax (hereafter ‘CIT’), personal income tax and all legal or conventional social security contributions.

The amount of these financial aids will not be included in the assessment of turnover limits provided for in Articles 50-0, 69, 102 ter[2], 151 septies et 302 septies A bis[3] of the French Tax Code (hereafter ‘FTC’).

• These measures will enter into force on a date set by decree which may not be more than fifteen days after the date of receipt by the Government of the European Commission’s decision on State aid.

Article 3 – Tax deduction of rent write-offs

As the Tax Law currently stands, aid and debt write-offs of a commercial nature granted by companies are generally tax deductible only if they qualify as a regular management act for those granting them.

Conversely, aid and debt write-offs of a financial nature which are not motivated by commercial reasons are not tax deductible.

By exception, in the case of collective proceedings, aid and debt write-offs of a commercial nature are tax deductible even when it is not carried out in the interest of the company and aid and debt write-offs of a financial nature are deductible subject to the existence of an interest of the contributing company.

The tax deductibility of debt write-offs[4] is extended to rent and ancillary write-offs for the lessor, even in the absence of collective proceedings.

Debt write-offs covered by this measure would be deductible without for the lessor to prove the existence of an interest.

This provision only applies to rent write-offs relating to properties leased to companies.

Moreover, this tax deduction only applies in the presence of a genuine renunciation of the collection of rents, i.e. write-offs between unrelated entities.

Thus, if the lessee company is run by an ascendant, descendant or member of the lessor’s tax household, the benefit of the provisions of this Article is subject to the condition that the lessor can justify by any means the company’s cash-flow difficulties.

As a general rule, a lessor who foregoes income to which he is normally entitled could, in certain circumstances, be regarded as owning such income and therefore be taxed as such even though he would not actually received that sum.

However, write-offs of rent and ancillary taxable in the category of property income (‘Revenus fonciers’), which would be granted by lessors would not be considered as taxable income and would not affect the deductibility of the corresponding charges. This measure also applies to rents taxable in the category of Non-Commercial Profits (‘BNC’)[5].

Lastly, the lessees benefiting from the rent write-offs could, temporarily, benefit from an increase in the €1 million limit on the use of tax losses up to the amount of the aid and debt write-offs received[6].

• These measures apply to debt-write-offs granted between April 15th 2020 and December 31st 2020.

VAT

Article 5 – Reduced VAT rate of 5,5% applicable to personal protective equipment

The purpose of this provision is to reduce at 5,5% the rate of Value Added Tax (hereafter ‘VAT’) applicable to masks and protective clothing suitable for combating the spread of the COVID-19 epidemic.

Regarding the masks, these include:

• Respiratory protection masks (FFP) for the protection of the wearer against inhalation of droplets satisfying the filtration FFP2, FFP3, N95, N99, N100, R95, R99, R100;
• Masks for medical use, known as ‘surgical masks’ or ‘medical mask’, for the protection of the wearer’s environment by avoiding the projection of droplets from the wearer of the mask and complying with standard 14683;
• Masks reserved for non-health uses failing within the two categories of work equipment recently created by the interministerial note of March 29th 2020;
• Masks that will be specially designed for the use of the general public, in particular those that will be made compulsory to wear.

The list and definition of technical characteristics of the eligible masks and protective clothing will be specified by decree.

• This measure applies to intra-community supplies and acquisitions whose operative event occurs from March 24th 2020 until December 31st 2021.

Article 6 – Reduced VAT rate of 5,5 % to personal hygiene products

The purpose of this provision is to reduce at 5,5% the rate of the VAT applicable to products designed for personal hygiene and suitable for combatting the spread to the COVID-19 epidemic.

Particularly, it concerns hydro-alcoholic gels and all disinfectants, including hydro-alcoholic solutions which do not contain gelling agents, that are useful in fighting the spread of the epidemic.

The list and the definition of technical characteristics of the eligible products will be specified by decree.

• This measure applies to intra-community supplies and acquisitions whose operative event occurs from Mars 1st 2020 until December 31st 2021.

Personal Income Tax

Article 4 – Tax exemption for overtime

Overtime hours worked by employees from March 16th, 2020 (beginning of the lockdown) until the end of emergency health state will be totally exempted from personal income tax and social security contributions.

In order to support employees, the personal income tax exemption threshold applicable to overtime payments will be raised from €5,000 to €7,500.

Article 11 – Tax exemption of the exceptional bonus paid to public administration staff

An exceptional bonus shall be paid to public administration staff deployed during the emergency health state.

This bonus is exempted from personal income tax and all legal or conventional social security contributions.

Article 14 – Donations: Increase of tax deduction limits

In order to support donation from individuals, the personal income tax exemption threshold applicable to donations granted to charitable associations supporting the most needy (in particular food banks) will be raised at €1,000.

• This measure applies for the taxation of income for the FY 2020.

Article 20 – Partial activity scheme

From May 1st 2020, employees who are subject to an isolation measure due to their vulnerability, and employees who are parents of a child under the age of 16, without a childcare solution, will be able to benefit from the partial activity scheme.

The eligible employees will receive a compensation equal to 84% of their net remuneration and at least the minimum wage (‘SMIC’) for the period during which they cannot work.

• This measure will apply from May 1st 2020 and for the whole period of the isolation, eviction or home support scheme.
• For vulnerable employees or employees sharing their home with vulnerable persons, this measure will apply until a date set by decree and no later than December 31st 2020.

[1] Loi n°2020-473 du 25 avril 2020 de finances rectificative
[2] Limits under micro-tax schemes
[3] Turnover limits under below companies can fall under the actual simplified tax regime in the category of Industrial and Commercial Profits ('‘BIC') and be exempted from balance sheet requirements
[4] Article 39, 1-8° of FTC
[5] For example, a taxpayer subletting a real property
[6] Art. 209, I of FTC