France: Tax-Efficient Sectors
Tax Incentives Announced In 2009
In a bid to entice foreign film-makers to France, a new tax incentive ratified by the French parliament in December 2008, will enable international film producers to benefit from a 20% tax reduction on production costs when they film in France.
Forming part of the 2009 Finance bill, the introduction of this international tax credit, will serve as a large incentive for foreign film companies.
Under the terms of the initiative, international producers of both foreign films and televised series will benefit from a 20% tax credit on expenses incurred in France – up to a limit of EUR4m, provided that their work has a link to either French or European culture.
According to Thierry de Segonzac, President of Ficam, the French federation of cinema, audiovisual and multimedia industries, 2008 proved a disastrous year for the industry.
Alluding to specific occasions where prohibitive production costs resulted in the cancelling of filming in France in favour of less expensive alternative locations, Ficam’s president reported that spending on four foreign film productions in France in 2008 amounted to a mere EUR3.7m.
Eager to tempt American film producers in particular back to France, Ficam extolled the new tax incentive, convinced that from 2009 it will serve to generate growth of more than EUR100m, as much as EUR200m by 2010, and EUR250m by 2015 – the equivalent of around 480 days of foreign filming in France as opposed to 120 days currently.
In a bid to spur economic development in the French overseas territories, the National Assembly approved legislation in July 2009 granting tax incentives to businesses which invest in new "Zones Franches d’Activités" (ZFA), or Activity Zones in the territories, until 2019. Eligible businesses can benefit from a 50-80% reduction of their taxable base for corporate and undeveloped land tax depending on the territory in which they are investing, and business the activity, being carried out. Research and Development and projects associated with tourism and the environment in Guyana, parts of Guadeloupe and the Réunion Islands have been designated as priortoy areas under the law. Alternatively, investors can use an 80-100% reduction for local business tax, with reductions capped at EUR150,000 and EUR300,000 respectively.
However, on June 30, 2009, Budget Minister Eric Woerth announced the government’s intention to reduce certain tax breaks whose “relevance and efficiency” appeared questionable, and to reflect on a means by which to reduce global fiscal expenditure.
In October, 2010 the French Budget Ministry published key details of the country’s 2011 finance bill, which provided for drastic cuts in public spending and for a EUR9.5bn cut in existing tax breaks.
During 2012, a number of measures were announced by the government, these include:
- A temporary exceptional contribution applying to the 2011 and 2012 fiscal years of 5% of corporate income tax liability for companies with a minimum turnover of EUR250 million, making the effective corporate tax rate 36.10%.
- A 3% surtax on corporate dividend distributions and deemed dividends paid by French entities. Companies falling under the EU parent/subsidiary directive and/or the domestic participation exemption are not affected by the surtax, nor are collective investment funds and SMEs.