Following their adoption by the French Parliament, the Fourth Amended Finance Act for 2011 and the Finance Act for 2012 were published in France’s official journal on December 29. The Social Security Finance Act for 2012 was published on December 22. This article focuses on the notable tax aspects of these three bills. (For prior coverage of the modified 2011 finance bill, see Tax Notes Int’l, Aug. 1, 2011, p. 322, Doc 2011-15914, or 2011 WTD 142-1.)

Businesses

Corporation Tax

Exceptional Additional Surcharge Contribution

For financial years 2011 and 2012, companies with turnover exceeding €250 million (about $319 million) will pay an additional surcharge contribution equal to 5 percent of the amount of the corporation tax (33.33 percent) owed, resulting in an effective corporate income tax rate of 36.1 percent.

Interest Deduction

The deduction of financial costs relating to the acquisition of shares will be disallowed when the acquiring company is unable to demonstrate that decisions relating to the shares are actually made by the acquiring company or another company established in France belonging to the same economic group, and that the control or influence over the acquired company is actually exercised by the acquiring company or its affiliate.

This provision applies to acquisitions of shares made on or after January 1, 2012, and to those carried out during the eight previous financial years, but only for the remaining reinstatement period.

The reinstatement must be made in the same financial year that the acquiring company must demonstrate the decision-making power and control or influence on the acquired company, and it should end at the end of the eight years following the acquisition.

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