Home / News / Draft Finance Bill for 2021

Draft Finance Bill for 2021

Main measures


The French government has presented the draft Finance Bill for 2021. Here is a selection of the main measures proposed by the draft finance bill for companies.          

I. Decrease of the CVAE and adjustment of the rate of the CET value-added based ceiling

As a follow-up to the intense debate which took place recently regarding the relevance of high taxes bearing on means of production, Article 3 of the draft finance bill proposes to lower the CVAE (company value-added contribution) from 2021, by 50%. Since this tax is a major source of revenue for regions, an alternative source of funding is set up for them, based on the allocation of a fraction of VAT.
The ceiling on the CET (territorial economic contribution) based on value-added would be also lowered from 3% to 2%.

II. Modernization of the parameters of the method used to assess the rental value of industrial establishments and modification of the revaluation coefficient  

Article 4 of the draft finance bill proposes to modernise the rates applicable to the cost price of various components of industrial facilities, which would significantly reduce property taxes.

III. Possible neutralization of the taxation of unrealized capital gains resulting from a revaluation of assets

Article 5 of the draft finance bill introduces a temporary measure which would allow companies conducting a revaluation of their tangible and financial assets to opt for the exclusion of the unrealized capital gain from the taxable income of the fiscal year of the revaluation.
For amortizable fixed assets, the taxation of the unrealized capital gain would be spread over 15 years for constructions or 5 years for other amortizable fixed assets. Amortization and provisions booked during subsequent fiscal years would be calculated on the basis of the revalued values.
For non-amortizable fixed assets, the taxation of the unrealized capital gain would be deferred until disposal of the assets. Provisions for depreciation booked during subsequent fiscal years would be calculated based on non-revalued values.
This temporary measure would apply to the first revaluation incurred during a fiscal year ended between 31 December 2020 and 31 December 2022.

IV. Possible spread of the taxation of capital gains made upon realisation of a sale and leaseback operation

Article 6 of the draft finance bill would restore and modify the possibility to spread the taxation on the capital gain made upon realisation of a sale and leaseback operation. The spread would be possible for a maximum period of 15 years and would only be applicable to sales of buildings preceded by a sale agreement dated between 28 September 2020 and 31 December 2022. The temporary measure would be reserved to buildings allocated to the lessee's business activity and would exclude those allocated to its own patrimonial activity. As an exception, the scheme would apply in the event that a building is leased by the lessee to a related company within the meaning of point 12 of Article 39 of the French General Tax Code and which allocates said building to a business activity.

V. Adjustments to the CIR and CII

Several adjustments to the CIR (research tax credit) and CII (innovation tax credit) rules are proposed by Article 8 of the draft finance bill:

  • abolition of the 50% increased rate of CIR and the 40% increased rate of CII due to apply to expenses incurred by businesses located in Corsica for fiscal years ending on or after 31 December 2019, but the introduction of which still needed to be fixed by decree;
  • for innovation expenses incurred from 1 January 2020 by businesses located in Corsica, the CII rate would be increased to 35%;
  • the rule whereby the expenses taken into account are doubled when eligible operations are entrusted to public or similar bodies would be abolished;
  • legislative provisions allowing ruling requests to be submitted not to the ministry responsible for research but to other bodies responsible for supporting innovation, such as the ANR (National Research Agency) would be abolished.

VI. Clarification of VAT rules applicable to composite supplies

Article 9 of the draft finance bill proposes to adopt at a legislative level the principles established by the CJEU concerning the VAT treatment of single global transactions, i.e. those comprising several elements that, by themselves, would be covered by different VAT rules. 

VII. Postponement of the entry into force of the new VAT regime for e-commerce 

In view of the health crisis, Article 10 of the draft finance bill proposes to postpone the date for entry into force of provisions transposing the e-commerce VAT package, adopted as part of the 2020 finance law, to 1 July 2021. 

VIII. Extension of the rate of interest on late payments and arrears

Article 20 of the draft finance bill proposes to make permanent the reduction from 0.40% to 0.20% per month of the interest rate on late payments and arrears, which was initially supposed to apply until 31 December 2020.

IX. Creation of an optional VAT group regime and review of the scope of rules for “autonomous group of persons”

Article 11 of the VAT Directive, allowing each Member State to consider as a single taxable entity persons established in the territory of that State who are independent from a legal perspective but who are closely linked to one another from a financial, economic and organisational perspective, would be transposed into domestic law. This optional regime would come into force on 1 January 2023 and would be accompanied by a review of the scope of the VAT exemption applicable to “autonomous groups of persons” under Article 261 B of the French General Tax Code, in order to take account of CJEU case law which has restricted its scope to activities that are exempt on the basis of the general interest. This would exclude companies in the banking, financial and insurance sectors whose operations are exempt under Article 261 C of the French General Tax Code.

Find more about our law firm:

Our law firm is a leading international business law firm. Its deep roots, unique positioning and highly recognised expertise enables it to deliver innovative, high value-added solutions in tax, business, corporate and labour law.

cabinet avocats CMS en France

About our law firm

publication tax law 330x220

Tax law: all our publications

contact us 330x220

Contact us