Enactment of the French Second Amending Finance Act for 2012: Key Corporation Tax Measures


The French Second Amending Finance Act for 2012 was adopted by the French Parliament on July 31, 2012 and was enacted on August 17, 2012 [the "Act"]. The core objective of the Act is to reduce the government deficit below 4.5% of GDP for 2012, pursuant to the Council of the European Union's Recommendation on France's 2012 national reform program. This objective has mainly been implemented by increasing taxes borne by the largest companies.

The key corporate tax measures of the Act are as follows:

- Financial support (subsidies, forgiveness of debt etc.) granted by companies to related or unrelated French or non-French companies or permanent establishments is no longer permitted as a deductible expense when such financial support does not have a commercial purpose, unless the assisted company is subject to collective insolvency proceedings;

- Dividends distributed to shareholders by French companies will be subject to an additional tax of 3% at company level which does not qualify as a deductible expense in determining the company's taxable income. Dividends paid in shares or distributed by collective investment undertakings, as well as by small and medium-size enterprises (SME) not belonging to a group, are not subject to such tax. Distributions between companies which are members of the same tax group are also excluded...

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