The Draft Finance Bill for 2021 is made public


Tax e-Alert

The draft finance bill (DFB) for 2021 was made public on 28 September 2020. The main tax measures are summarized below. 

Reduction in the main production taxes

As announced as part of the French economic recovery plan, four measures are planned to reduce the burden of these taxes for companies:

  • Decrease by half of the CVAE(1) for all companies liable to this tax as from 2021 (DFB art. 3) ;
  • New calculation methods for assessing the rental value of industrial plants would lead to a 50% reduction in rental values from 2021 and therefore a reduction of TFPB(2) and CFE(3) contributions (DFB art. 4) ;
  • Reduction of the CET cap based on value-added from 3% to 2% (DFB art. 3). This measure, applicable from 2021, will ensure that all companies, including those eligible for this capping system, effectively benefit from the reduction in the CVAE and the CFE ;
  • Extension for three years, by decision of local authorities, of the CFE exemption provided for in the event of the creation or extension of establishments (DFB art. 42).

Neutralization of the tax consequences of free asset revaluations (DFB art. 5)

In order to improve the equity and the financing capacities of companies in the context of the COVID-19 pandemic, the draft finance bill introduces a temporary and optional measure purporting to neutralise the immediate tax consequences of tangible and financial assets revaluations.

The proposed measure would consist, for depreciable fixed assets, in spreading the taxation of revaluation differences over a period of 5 or 15 years depending on the nature of the asset, and, for non-depreciable fixed assets, in deferring taxation of revaluation differences until the relevant assets are disposed of.

Adjustments to the research tax credit and the innovation tax credit (DBF art. 8)

The draft bill would adjust the mechanism of the research tax credit (CIR) and innovation tax credit (CII) on several points:

  • Alignment of the CIR tax base where research operations are assigned to third party organisations : the tax base would no longer be doubled where the research activities are carried out by a public organisation. This measure had been recommended by the French Court of Auditors (Cour des Comptes) since 2013, in order to make the CIR more secure regarding European regulations on State aid;
  • Suppression of the 50% CIR increased rate and reduction to 35% of the CII increased rate applicable to eligible expenditure incurred in Corsica, in order to comply with the aid intensity ceilings allowed by European regulations on State aid;
  • The Ministry of Justice would become the sole authority entitled by the law to grand rulings or approvals in respect of the CIR, since other authorities, such as the National Research Agency (ANR), are no longer organised to deal with such requests.

Introduction of a VAT group regime (DFB art. 45)

The draft finance bill provides for the transposition, applicable from 1 January 2023, of Article 11 of the Directive 2006/112/EC of 28 November 2006, whereby each Member State may regard as a single taxable person any persons established in the territory of this Member State, who are legally independent but are closely connected with each other for financial, economic or organisational purposes. This new regime would be optional and would reinforce the neutrality of VAT for groups, particularly in sectors carrying out tax-exempt transactions. Taxable persons who have elected to form a single taxable person would have to appoint one of them as the head of the group in order to comply with all the obligations related to the tax and make the tax payments, in respect of which all members would remain jointly and severally liable. The group would be set up for a minimum period of three years.

Spreading of the capital gain in the event of leaseback of real property (DFB art. 6)

In order to facilitate the refinancing of companies and enable them to improve their cash position, the draft bill provides for a temporary measure allowing companies to spread the gain realised upon conclusion of a leaseback agreement in respect of property owned by the company. Such mechanism had already been implemented following the financial crisis of 2008. The taxation of the capital gain would be spread over the length of the leasing contract with a maximum of 15 years.

Simplification of the registration formality for some company acts (DFB art. 18)

In order to simplify legal formalities for companies that are currently obliged to file their deeds with the tax authorities for the execution of the registration formality, and then with the registry of the commercial court for filing, the draft bill plans to modify the law in order to no longer require the compulsory registration of certain company deeds, in particular where budget implications are low. This would apply to deeds recording share capital increases, share capital reductions, constitution of EIGs and share capital amortization. The draft finance bill would also make it possible to file company deeds with the registry of the court before the registration formality executed at the tax office, even when such formality remains mandatory.

Other measures

The main other tax measures envisaged are as below:

  • Clarification of the VAT rules applicable to composite offers in order to incorporate, at legislative level, the principles established by the EU Court of Justice concerning the treatment of commercial offers consisting of several elements covered by different VAT regimes (DFB art. 9);
  • Postponement of the entry into force of the rules amending the VAT regime of e-commerce in accordance with the EU Council Decision to postpone the entry into force of the new rules to 1 July 2021 (Decision No. 9123/20 Fisc. 140 Ecofin 535). Some details would also be added to the mechanism adopted as part of the finance law for 2020 (DFB art. 10);
  • The rate of late payment interest and the interest on arrears that would remain stable at their current level of 0,20% per month (DFB art. 20);
  • Tax incentives for the use of renewable energy in transport would be reinforced, in particular by increasing the target rates of biofuels for the purposes of  the TIRIB (“tax incentive for the use of biofuels ”)(DFB art. 15) ;
  • The development tax to combat soil artificialisation of land  would be adapted through the strengthening of incentives for densification, land sobriety and renaturation (DFB art. 43);
  • The 25% tax base increase applied to certain income of professionals whose accounts are not entrusted to a professional accountant or similar organisation would be gradually abolished (DFB art. 7);
  • Seven new low-yield taxes and some inefficient tax expenditures would be suppressed (FDP art. 16 and 17);
  • In terms of individual income tax, a new tax credit would be created in respect of expenses incurred to install a charging system on the parking space allocated to the taxpayer's main (DFB art. 12);
  • Procedures for the forced recovery of certain public debts would be harmonised with the aim of simplifying public action and making it easier for the user to understand (DFB art. 19).
  • The taxation of road vehicles initiated in the initial finance bill for 2020 would be further reformed (DFB art. 14).


(1) Company value-added contribution

(2) Property tax on constructed property

(3) Corporate real property tax


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Emmanuel Raingeard de la Blétière

Emmanuel Raingeard de la Blétière

Avocat, Associé, PwC Société d'Avocats

Valérie Aelion

Valérie Aelion

Avocat, Directeur, PwC Société d'Avocats

Marie-Hélène Pinard-Fabro

Marie-Hélène Pinard-Fabro

Avocat, Directeur, PwC Société d'Avocats