The Finance Act for 2022 institutes a series of tax changes for businesses and individuals.
We present the main measures applicable
For companies
1. New: Amortization of goodwill
Under accounting rules, goodwill is presumed to have an indefinite useful life and therefore cannot be amortized.
However, this simple presumption may be rebutted if the company can demonstrate that the useful life of the goodwill is in fact limited(e.g. goodwill backed by a contract or legal authorization with a limited useful life). In this case, goodwill is amortized over its useful life or, if this cannot be reliably determined, over 10 years.
As a simplification measure, small businesses can use this ten-year depreciation period as of right, without having to demonstrate that the goodwill they acquire has a limited useful life.
In practice, this applies to companies that do not exceed two of the following three thresholds: sales less than or equal to €12 million, total assets less than or equal to €6 million, and an average number of employees of 50.
Depreciation booked in this way is not deductible for tax purposes. The Conseil d'Etat recently ruled on the question of whether small businesses could deduct the 10-year depreciation of goodwill booked in the accounts, without having to prove that the depreciation was irreversible.
The judges concluded that the accounting rule was incompatible with the tax rule.
Unlike tax rules, the accounting standard does not make depreciation conditional on the beneficial effects of goodwill ending at a specific date. As a result, a small company that records book depreciation cannot use it to determine its taxable income.
Exemption for funds acquired between 2022 and 2025
By way of derogation, for goodwill acquired between January1, 2022 and December 31, 2025, depreciation recognized in the company's accounts in respect of goodwill is deductible.
In the context of the gradual recovery from the crisis linked to the covid-19 epidemic, the aim of the measure is to reduce the cost of taking over a business for investors, thereby encouraging the acquisition of goodwill and the maintenance of business activity.
2. New: Creation of a new status for sole traders
Based on the observation that the EIRL (Entrepreneur Individuel à Responsabilité Limitée) scheme has not been as successful as expected, the bill to promote independent professional activity provides for the creation of a single, protective status for individual entrepreneurs(the "self-employed" bill ).
Recognition of two heritages:
Sole proprietors would thus automatically hold 2 assets, without the need for a declaration of assignment:
- professional assets, consisting of property, rights, obligations and securities, useful for the activity or plurality of independent professional activities;
- personal, consisting of assets not included in business assets.
The demarcation between business and personal assets would henceforth be based on a legal criterion: the "usefulness" of assets, rights, obligations and securities to the independent professional activity or activities.
Possible assimilation to an EURL or an EARL, validating the option for corporation tax:
If you are a sole trader with a real tax regime, you can opt to be assimilated to a EURL (with the trader as sole shareholder).
This option to be treated as an EURL will be irrevocable and will automatically entail the option to be subject to corporate income tax, without the corresponding creation of a corporate structure.
Amounts paid by the entrepreneur to himself as remuneration for his activity will be treated for tax purposes as remuneration paid to the partner of an EURL (or EARL) that has opted for corporation tax (i.e., they will be deductible from income and subject to income tax according to the rules governing salaries and wages).
Withdrawals made by the entrepreneur, other than remuneration, will be treated as dividends and will not be deductible in determining income.
Liability for social security contributions
The net remuneration of the entrepreneur, i.e. after deduction of compulsory personal social security contributions and actual expenses allowed by the tax authorities, plus bonuses and optional contributions, will be subject to social security contributions for non-salaried workers.
Dividends subject to social security contributions
As under the current system, sole traders who have opted for corporation tax will be liable for social security contributions on the portion of distributed income exceeding 10% of net profit.
Advantages of opting for EURL status
Taxable at the reduced corporate income tax rate of 15%, up to a limit of €38,120 (provided sales do not exceed €10 million).
Deduction of salaries paid to the entrepreneur, who is treated in the same way as a majority shareholder whose remuneration is subject to income tax in the salaries and wages category (article 62 of the CGI).
Disadvantages of the EURL option
Entrepreneurs operating on a BNC basis: determination of taxable income on an accrual basis rather than on a cash basis.
Loss of certain capital gains exemptions (151 Septies and 151 Septies B of the CGI).
Reinvested profits will not be immediately taxed in the hands of the entrepreneur (favorable). On the other hand, the apprehended profits will be treated as dividends (taxed at the PFU or at the IR rate) and, above certain limits, will be subject to social security contributions.
3. More flexible capital gains tax regimes
The French Finance Act for 2022 eases the conditions for exempting capital gains realized on the transfer of a sole proprietorship or a complete branch of activity, and capital gains realized on retirement.
In the absence of specific provisions, these changes concern capital gains realized in 2021 and subsequent years for companies subject to income tax, and in respect of financial years ending on or after December 31, 2021 for companies subject to corporation tax.
Exemption for capital gains realized on the transfer of a sole proprietorship or a complete branch of activity (article 238 quindecies of the CGI) :
Revaluation of exemption ceilings :
Capital gains on the sale of business assets, excluding real estate, realized on the transfer of a sole proprietorship or an entire branch of activity are exempt from income tax or corporation tax, under certain conditions, when the value of the assets transferred does not exceed €300,000. For amounts between €300,000 and €500,000, the exemption is partial. The exemption also applies to social security contributions on income from assets.
As the €300,000 and €500,000 ceilings have never been changed since the amended 2005 Finance Act, they no longer seem to reflect economic realities.
This is why the amount has been raised from €300,000 to €500,000 for total exemption, and from €500,000 to €1,000,000 for partial exemption.
Example: A retailer realizes a capital gain of €250,000 on the sale of his business for €800,000.
As a result of the increase in the exemption thresholds, retailers can now benefit from partial exemption of their capital gains. This was not previously possible, as the extended €500,000 threshold was exceeded.
- The amount of his tax-exempt capital gain is therefore : 250 000 € × (1 000 000 € - 800 000 €) / 500 000 € = 100 000 €
- The taxable amount is therefore €250,000 - €100,000 = €150,000.
Exemption for capital gains on retirement, reduced to three years :
Operators who sell their sole proprietorship or all the rights they hold in a partnership subject to corporate income tax when they retire may, under certain conditions, opt for an income tax exemption on the capital gain arising on the sale. This exemption does not extend to social security contributions.
Given the difficulties faced by farmers who have reached retirement age, or who have been forced to take early retirement as a result of the health crisis, in finding a buyer within the statutory timeframe, the period between retirement and sale has been extended from 24 months to 36 months, provided that the farmer takes early retirement between January 1, 2019 and December 31, 2021, and that the retirement precedes the sale.
4. Changes to the innovation tax credit
To continue supporting innovation spending by SMEs, the tax credit has been extended until December 31, 2024.
This extension is subject to the following conditions, with effect from January1, 2023 :
- the removal from the tax credit base of operating expenses, which are determined by applying a flat rate of 75% to depreciation of fixed assets allocated to innovation operations, and a rate of 43% to personnel expenses allocated to these same operations;
- an increase in the CII rate from 20% to 30% of eligible expenditure up to a maximum of €400,000 per year, i.e. a maximum tax credit of €120,000 instead of €80,000.
Note:
The acquisition date refers to the date on which the deed of purchase is signed. This deed must therefore be signed by December 31, 2022 at the latest.
5. Double the training tax credit for VSE managers :
Companies that incur expenses to train their managers can claim a tax credit equal to the number of hours of training multiplied by the hourly SMIC rate, up to a limit of 40 hours per calendar year and per company.
The amount of this tax credit is doubled for companies with fewer than 10 employees and sales or balance sheet total of less than €2 million.
This doubling of the tax credit applies to training hours completed between January1, 2022 and December 31, 2022.
As the gross hourly SMIC was revalued to €10.48 on October1, 2021, the maximum tax credit is €419 in 2021. It is in fact the ceiling that has been doubled (from €419 to €838).
For private customers
1. Income tax - scale adjustment
For income tax purposes in 2021, the limits of the brackets on the income tax scale have been raised by the average increase in consumer prices (excluding tobacco) expected for 2021, i.e. 1.40%.
| Income tax for 2021 | |||
| Scale | Gross tax calculation | ||
| Brackets (1) | Rates | Quotient R/N (1) | Gross tax (2) |
| Up to €10225 | 0 % | Up to €10225 | |
| From €10225 to €26070 | 11 % | From €10225 to €26070 | (R x 0.11) - (1,124.75 × N) |
| From €26070 to €74545 | 30 % | From €26070 to €74545 | (R× 0.30) - (6078.05 x N) |
| From €74545 to €160336 | 41 % | From €74545 to €160336 | (R x 0.41) - (14278.00 X N) |
| More than €160,336 | 45 % | Over €160,336 | (R× 0.45) - (20691.44 X N) |
2. 500,000 fixed allowance for retiring SME managers
Abatement extended to December 31, 2024
Capital gains on disposals of securities and corporate rights by retiring directors of SMEs subject to corporation tax are reduced by a fixed allowance of €500,000 for income tax purposes.
This scheme, applicable to sales made since January1, 2018, was due to expire on December 31, 2022.
However, in order to give the managers concerned a clear view of the tax regime applicable to the sale of their company's shares after 2022, the French Finance Act for 2022 extends this preferential arrangement by 2 years. As a result, the fixed €500,000 allowance for retiring SME managers will apply to sales made up to December 31, 2024.
Reminder: This €500,000 allowance applies regardless of whether the gain is subject to income tax (single flat-rate withholding tax of 12.8% or option for the progressive income tax scale). However, it does not apply to the calculation of social security contributions, which remain due on the gross amount of the gain realized.
Reminder of the conditions for benefiting from the fixed allowance of €500,000
| Reminder of the conditions to be met in order to benefit from the retirement allowance (CGI art. 150-0 D ter) | |
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Concerning the sale
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Total: sale of all the shares or rights held by the seller in the company concerned: OR Partial: sale of securities or rights representing more than 50% of the voting rights or, in the case where only the usufruct is held, of securities or rights representing more than 50% of the rights in the company's profits. profits. |
| Involving securities or rights held for at least one year at the date of sale | |
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Concerning the seller
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Have continuously held a management position in the company whose securities or rights are being sold for 5 years prior to the sale, with remuneration representing more than half of professional income. |
| Have held continuously, directly or indirectly through an intermediary or family group, at least 25% of the voting rights or rights in the corporate profits of the company concerned for the 5 years preceding the sale. | |
| Retire from the company within 2 years of the sale, or within 2 years prior to the sale. This period is extended to 3 years under the conditions set out below (see $ 2-14). | |
| In the event of a transfer of shares or rights to a company, hold alone, directly or indirectly, a maximum of 1% of the voting rights or rights in the corporate profits of the transferee company for the 3 years following the transfer. | |
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Concerning the company whose shares are being sold
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Continuously during the 5 years preceding the sale, carry on an operational activity or have as its sole corporate purpose the holding of equity interests in companies (these holdings must represent at least 90% of the company's gross assets). gross book value). |
| Be liable for corporation tax (IS) or be subject to it under the same conditions, if the activity was carried out in France. | |
| Be headquartered in an EU state, Iceland, Norway or Liechtenstein | |
| Be an SME as defined by the European Union (companies meeting certain criteria in terms of headcount, sales or balance sheet total). This condition is assessed on the closing date of each of the last 2 financial years preceding the sale. If the company whose shares are being sold draws up consolidated accounts, these conditions are determined on the basis of these accounts (CGI, ann. Il art.74-0 Q; CE 11 octobre 2012. n° 343844). |
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3. Censi-Bouvard tax reduction
The income tax reduction for non-professional furnished rental investment (known as "Censi-Bouvard"), which is available for purchases made up to December 31, 2021, has been extended for a further year.
Until December 31, 2022, this tax incentive applies to the acquisition of new homes or homes in a future state of completion, or homes completed at least 15 years ago that have been renovated prior to purchase or are undergoing renovation work, and located in certain serviced residences or specialized structures (student residences, serviced residences for the elderly or disabled), when these homes are leased furnished for at least 9 years to the operator of the establishment.
Note:
The acquisition date refers to the date on which the deed of purchase is signed. This deed must therefore be signed by December 31, 2022 at the latest.
4. Donations qualifying for the "Coluche" reduction: €1,000 exemption ceiling extended
Donations and contributions made by taxpayers domiciled in France and assimilated to non-profit organizations that provide meals or care to people in difficulty are eligible for a 75% income tax reduction, up to a limit of €554 for income tax purposes in 2021 and €562 for income tax purposes in 2022.
By derogation, for the taxation of 2020 and 2021 income, the fraction of payments qualifying for the 75% reduction has been raised to €1,000.
This temporary increase in the ceiling on donations eligible for the 75% tax reduction has been extended once again, for a period of 2 years. It will apply to income tax for each of the years 2020 to 2023.
