France Announces Corporate Tax Surcharge, Hikes VAT Rate to Reduce Debts

(Sunnyvale, CA) The government of France announced plans to impose a ‘temporary’ corporate tax surcharge of 5% for 2012 and 2013 for large companies.

The French government also plans to increase the 'reduced' value-added tax (VAT) rate of 5.5% to 7%(with certain limited exceptions).

The move is part of France’s second austerity package designed to increase corporate tax revenue and reduce government expenditure and debts.

New Corporate Tax Proposals

The corporate tax proposal mainly focuses on two measures that would affect business taxpayers:

• A temporary 5% surcharge on corporate income tax would be implemented in 2012 and 2013 for companies having an annual turnover of €250 million or more.
• The “reduced VAT rate” (currently at 5.5%) will be increased to 7% for all goods and services (with an exception to food and certain goods/services provided to disabled persons).

The French government also introduced an exceptional 4% individual income tax on taxpayers with income of €250,000 or more if single and €500,000 or more for qualifying couples— which is currently being considered by the French Parliament.

Some of the proposed measures concerning taxation of individuals, if enacted, would increase the individual income tax 'flat rate' that applies for dividends and savings income from 19% to 24%.

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Published: November 21, 2011. The information provided on this page is intended merely to highlight issues for general information purposes only. It is not comprehensive nor does it provide legal advice. Any information is subject to change without notice. No liability whatsoever is accepted by Nair & Co.