Optimize the deduction of current expenses

In terms of corporate tax, most of the charges in the interest of the company are deductible (with exceptions provided for by law, particularly concerning lavish expenses: pleasure residence, hunting or fishing expenses, etc.) .
Many companies do not necessarily know what charges can be deducted from their income and therefore fail to optimize their tax situation. However, they can deduct a wide range of expenses: representation costs, IT costs, rent, documentation costs, remuneration paid to employees and managers, business trips, various and varied supplies, recourse to an external service provider, etc. ask your accountant what fees can be deducted.
In addition, the legislator sometimes gives several methods of taking charges into account, by providing a scale for example. It will be necessary to determine which method is the most advantageous, even if it turns out to be more complex to use.

Maximize the deduction of financial charges

It is one of the tax optimization levers most used by large companies. Thus, many companies reduce their taxable income by deducting the interest on loans taken out with related companies (intragroup loans) or to make certain investments, such as the acquisition of the securities of a target company.
Generally, these assemblies are carried out via a holding company. It will thus go into debt in order to acquire company securities. The loan interest will be deducted from the taxable result of the holding company and the dividends accruing to it will be exempt due to the application of the mother daughter scheme and will allow the repayment of the loans taken out. Thus the acquiring company will most of the time be in deficit, the income from its participations being exempt and its expenses being deductible. The situation can be optimized by resorting to the tax consolidation regime, allowing the losses of certain companies to be offset against the profits generated by other entities.
The deductibility of financial expenses is subject to a general limitation. Thus, the net financial charges borne by a company subject to corporate tax are only deductible up to 75%, when they exceed 3 million euros.

Good management of deficits

Corporate tax can be reduced through good management of deficits. Some companies may even have a very large “stock” of deficits that allows them not to pay corporate tax for several years.
Deficits can be carried forward to future profits with no time limit. The amount of deficits that can be carried forward to a profitable financial year is capped at 1 million euros + 50% of the profit exceeding 1 million euros.
So if a company has made 5,000,000 euros in profit, the amount of the attributable deficit will be 1,000,000 + (4,000,000 x 50%) = 3,000,000 euros.
It is also possible to carry over the deficit to the profit of the previous year, up to 1,000,000 euros. This gives rise to a claim on the treasury (carry back system).

The research tax credit – CIR

The research tax credit (CIR) decreases the amount of tax due. It is based on the following expenses allocated to carrying out research and development operations:

  • operating expenses, fixed at a flat rate of 75% of depreciation allowances, 50% of staff expenses and 200% of expenses for young doctors,
  • maintenance of patents and plant variety certificates (VOCs),
  • technology watch expenses,
  • expenses for the defense of patents and plant variety certificates,
  • premiums and contributions relating to legal protection insurance contracts relating to disputes relating to a patent or a COV,
  • the costs of participating in official standardization meetings,
  • subcontracting expenses,
  • the cost of making new collections, for the textile industries,
  • depreciation charges,
  • personnel costs relating to researchers and research technicians,
  • the expenses of young doctors

The tax credit is equal to 30% of these expenses (5% for the fraction of them exceeding 100 million euros).

The tax credit for competitiveness and employment

The tax credit for competitiveness and employment is based on salaries not exceeding 2.5 SMIC (if this threshold is exceeded, the tax advantage simply does not apply, there is no transition device). The rate of this is 6%. This amount immediately reduces corporation tax.

Other tax credits and reductions

In addition to the research tax credit and the tax credit for competitiveness and employment, many other tax credits and reductions apply. Among these we find:

This list is not exhaustive.

Corporate tax exemptions

There are two types of corporate tax exemptions:

  • those relating to certain income,
  • those relating to certain entities.

Certain income is therefore expressly exempt from corporation tax. This is the case for certain capital gains (on equity securities for example) or equity products.
Thus, dividends paid to a parent company are exempt from corporation tax (after reintegration of a share of costs and charges of 5%).
In addition, certain entities that meet strict conditions see their income (or part of their income) exempt from corporation tax. Among these, we can cite young innovative companies or companies located in certain areas of the territory (ZFU, ZRR…).

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