The French national assembly approved a new tax bill on April 9, advancing the cause of Minister of Economy Bruno Le Maire. The project proposes important changes, including a stay on the reduction of corporate taxes and implementation the GAFA Rate, imposed on global tech giants (GAFA = Google, Apple, Facebook, Amazon), making it the first in Europe to do so.

After talks of an EU-wide digital tax stalled, France decided to launch their own. The vote passed the national assembly 81 to 7, and will now advance to the senate.

Hold on Corporate Tax Rate Reduction

The government had been committed to carrying out a progressive reduction of the corporate tax rate, starting from 33.3% in 2018 and gradually reducing to 25% by 2022. However, the national assembly has halted this change.  Initially, the measure will only be suspended in 2019 and only for large companies with revenue surpassing 250 million euros and with a taxable profit of more than 500,000 euros during the twelve months of its exercise.

Large companies will continue to face a tax rate of 33.33% on their profits during 2019. Some forecasts indicate that tax receipts following this delay will be approximately 1.7 billion euros, more than initial estimates that had incorporated the planned rate reduction. This new change in corporate tax is expected to affect 45% of companies subject to the general tax regime.

New Tax on Large Tech Companies

The GAFA tax specifically targets companies that generate revenue from digital activities in excess of 25 million euros in France and 750 million euros in the rest of the world. The idea of ​​the proposal is to impose a tax of 3% of the amount of business volume from a company´s digital activities within the French territory.  The tax, as presented, would be removed upon institution of an EU-wide digital tax.

 These pending tax changes illustrate the importance of staying informed on the numerous tax and rate changes to emerge in the coming months. The popularity of Le Maire´s reforms indicates that significant changes in corporate taxation are likely, and may have a large impact on the amount of tax to be paid.  Such changes underscore the value of a thorough understanding of the pending changes and detailed fiscal analysis of implications for each company operating in France.