In recent years, France has been pursuing an ambitious policy to reduce corporate tax. Although the nominal rate of corporate tax (33.33%) is higher than the European average, corporate taxation has become just as competitive as in other European countries. Recent international comparative studies have confirmed this: according to KPMG, France had the lowest business setup and operating costs (labor, facility costs, transport, utility costs and corporate tax) in the European countries surveyed in 2010 and was ranked 6th in the world among the 10 countries compared.

France is an ideal location for research and innovation

• France has had the best research tax credit in Europe since reforms were passed in 2008.
• Reduced corporate tax rate of 15% (instead of 33.33%) for income from intangible property.
• Creation of the innovative new company (jeune entreprise innovante – JEI) status in 2004, allowing such companies to benefit from tax and social security exemptions as well as the research tax credit in their first year of existence.

In light of these various measures, the 2010 KPMG “Competitive Alternatives” study cited above ranked France second in Europe for tax competitiveness when it comes to setting up R&D operations.

France offers an attractive tax regime for holding companies and decision-making centers

• Capital gains on the sale of equity transfers have been exempt from tax since 2007.
• Highly favorable tax consolidation rules for corporate groups.
• Exemptions for dividends received from subsidiaries.
• Highly favorable thin capitalization rules (deduction of interest on the cost of acquiring subsidiaries or assets).
• Highly flexible and secure tax approval regime for company headquarters.

Local business tax reform designed to support industrial activities

The abolition of local business tax on productive investments as of January 1, 2010 applies to new investment flows and existing investments. It is already considerably reducing the local business tax burden on industry and is making France more competitive for more capital-intensive investments.