2021 Finance Bill


French version

In brief

The French Finance Act for 2021 (the Finance Act) was enacted on December 29, 2020 and published in the French legal gazette on December 30.  The Finance Act includes corporate tax measures designed to improve the French business environment and local companies’ competitiveness.

Other provisions in the Finance Act notably affect individual taxation, value-added tax (VAT), customs, and small companies. Those provisions are outside the scope of this Insight.

Most of the measures apply as of January 1, 2021 and affect multinational enterprises (MNEs) with French operations or subsidiaries.  Such MNEs should consider the favorable impact of the applicable tax rate reductions with respect to their French operations as well as pornetial investment opportunities provided by the Finance Act.   

In detail

Reduction of French production taxes

In order to improve competitiveness, the Finance Act includes provisions aimed at reducing certain key taxes on production, with a focus on the territorial economic contribution (CET).

The CET consists of two different taxes: the companies’ land contribution (CFE) and the companies’ added value contribution (CVAE).  The CFE tax is based on the rental value of assets and properties that are subject to land tax.  The CVAE is based on the added value a company produces.  It is computed pursuant to progressive rates, based on a company’s gross revenue. 

  • The Finance Act provides that the combined CET (CFE+CVAE) is now capped at 2% of the company’s added value (instead of 3% previously) for the tax due as from 2021.
  • The Finance Act also reduces the applicable CVAE rates by half for all affected companies. The new table applies as follows:

Gross revenue ("Chiffre d'affaires") excluding VAT

New effective tax rates (Finance Act)

Lower than EUR 500K


Between EUR 500K and EUR 3M

0.25% x (gross revenue - EUR 500K)/EUR 2.5M

Between EUR 3M and EUR 10M

0.25% + 0.45% x (gross revenue - EUR 3M)/EUR 7M

Between EUR 10M and EUR 50M

0.7% + 0.05% x (gross revenue - EUR 10M)/EUR 40M

Over EUR 50M


These new provisions apply to the CVAE due as from 2021.  Therefore, companies can apply the new rates with respect to the CVAE installments due in June and September 2021.

  • The Finance Act also provides for a reduction of the rental value of industrial facilities (notably used to calculate the CFE) by half, pursuant to a defined accounting method. The reduction is applicable to the tax due as from 2021.
  • In order to stimulate investments, the set-up or extension of establishments can benefit from a three-year CFE exemption (as well as CVAE), subject to each municipality council’s decision.  The exemption applies to the set-up and extension of establishments, as from the year following the year of set-up of an establishment, or from the second year following the year during which an establishment extension occurred. 

The exemption applies to the set-ups and extension of establishments occurring as from January 1, 2021 subject to decisions of respective considered municipality councils before October 1, 2021. It is applicable to the tax due in 2022 for the set-up of establishments occurred in 2021 or for the tax due in 2023 for the extension of establishments occurred in 2021.

The exemption is subject to formal request of the taxpayer.

Observation: Companies should consider the impact of such provisions on their consolidated financial statements (e.g.. US GAAP) and their potential corresponding deferred tax treatment.

Tax deferral applicable to free asset revaluation

In order to improve companies’ equity and financing ability, the Finance Act temporarily allows companies to freely elect to revalue all their tangible and financial assets based on their fair market value under French GAAP. 

Under current rules, the difference resulting from this step-up would be taxable.  However, the Finance Act provides for a ‘neutralization’ of the tax impact of such an asset revaluation by allowing companies to benefit from certain tax deferral rules based on the type of asset. 

The tax deferral would stepup the difference with respect to depreciable fixed assets over a five-year or 15-year period (depending on the asset’s nature) and defer taxing the step-up with respect to non-depreciable assets until their future transfer.

This temporary regime is subject to a formal election and specific documentation requirements and commitments from each company choosing to benefit from this favorable tax treatment.

This new provision applies to the first revaluation process realized in a tax year ending on or after December 31, 2020 and until December 31, 2022.

Favorable tax treatment applicable to sale and leaseback transactions

In order to improve companies’ financing and treasury positions in the current COVID-19 environment, the Finance Act introduces a temporary favorable tax regime applicable to capital gains resulting from sale and leaseback transactions. 

Instead of an immediate taxation of the capital gain, a company disposing of its real estate in a sale and leaseback transaction with a leasing company may now elect to equally spread the entire gain over the duration of the lease agreement within a 15-year limit.

The regime is subject to a formal election, specific eligibility conditions and filing requirements.  Certain events, such as the acquisition of the real estate by the company or the early termination of the lease agreement, etc. would lead to ending the benefit of the regime and trigger the immediate taxation of the remaining gain.

The new regime applies to the sale of qualifying real estate to leasing companies occurring as from January 1, 2021 until June 30, 2023 and subject to a financing agreement approved by the lessee prior to the sale as from September 28, 2020 until December 31, 2022.

French corporate income tax rate reduction trajectory

The Finance Act does not include any changes to the previously enacted and already scheduled corporate income tax reduction trajectory.  Consequently, the 26.5% and 27.5% corporate tax rates scheduled for tax years beginning on or after January 1, 2021, and the 25% tax rate scheduled for tax years beginning on or after January 1, 2022 for all companies, remain applicable.

In addition, the Finance Act provides that the reduced corporate tax rate (15%) applicable to qualifying small and medium-size enterprises is extended to companies with an annual gross income (“chiffre d’affaires”) not exceeding EUR 10M (instead of EUR 7.63 previously) within the limit of EUR 38,120 of taxable income during a 12-month period. The new regime applies to tax years opened on or after January 1, 2021.

The takeaway

MNEs should consider the impact of the enacted measures with respect to their subsidiaries and operations in France as well as the potential financing and investment opportunities available as a result of the newly enacted favorable tax treatments. 

Note: Some of these measures are temporary.

MNEs also should consider how the reduced business tax rates as they apply to all companies locally could impact their IFRS positions and, for US MNEs, their US GAAP consolidated statements and deferred taxes. 

Let’s talk

For a deeper discussion of how this issue might affect your business, please contact:

International Tax Services, United States
Guillaume Barbier
+1 (347) 276-7441

International Tax Services, France
Guillaume Glon
+33 1 56 57 40 72


Suivez-nous !


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