In response to the coronavirus (COVID-19) epidemic, the French government recently proposed a legislative package of emergency measures consisting of (i) an Amending Finance Act for 2020, (ii) an Emergency Bill To Combat the Covid-19 Crisis and (iii) a Bill for Extending the Review Period in Constitutional Matters. In addition to this legislative package, the government has announced several tax and social measures that will be taken to support the French economy.
PROPOSED TAX AND SOCIAL MEASURES
The most significant tax and social measures regarding the provision of financial aid to companies include:
- Postponement of tax installments and of social security contribution: a deferral of payment for up to three months, without justification or formalities, granted for installments due in respect of direct taxes i.e., corporate income taxes, business tax (French “CFE”), property tax and tax on wages (French “taxe sur les salaires”) and social security contribution. No penalty will be applied. This postponement does not apply to value added tax (“VAT”), nor to personal income tax withheld at source by employers. Companies that have already paid their installments due in March 2020 may apply for a refund from the French authorities.Specific comments re. social security contributions due to URSSAF
- Note that if an employer does not want to opt for a deferral of all social contributions and prefers to pay the employee social contributions as usual, they may still pay the employer’s contributions later in installments.
- For employers whose social security contribution payments are normally due on the 5th of the month (i.e., company with more than 50 employees), additional information will be communicated later.
- In addition to these measures, payments due on March 20 by self-employed workers (“travailleurs indépendants“) have not been levied. The unpaid amount will be spread over subsequent due dates (i.e., from April to December 2020). In addition, self-employed persons may also request an adjustment of their social security contribution schedule to take into account a reduction of their income by reassessing their estimated income without waiting for the annual declaration.
In order to simplify the above-mentioned procedures, the French “DGFIP” provides an application template, available on the tax authorities platform (https://www.impots.gouv.fr/portail/node/9751)
Finally, for companies which face significant hardship, the French “Commission des Chefs de Services Financiers ” (“CCSF“) can grant further tax and social security contribution deferrals.
- Acceleration of VAT and R&D tax credits reimbursements – The French Government has instructed the French tax authorities to speed up the refund process for VAT and R&D tax credits. It is not indicated whether this measure will be extended to other tax credits.
- Direct tax and social security charges rebates will be granted to certain companies facing extreme difficulties due to the COVID-19 crisis, on a case-by-case basis after an individualized review of the company’s situation – same as above, a standard application, available on the tax authorities platform (https://www.impots.gouv.fr/portail/node/9751) has to be filed and sent to the corporate tax services.
- Suspension of tax audits of companies in the most affected sectors – The French Budget Minister Gérald Darmanin has stated that, for the industries directly impacted by the actual crisis, tax audits should be suspended until further notice. For the tax audits in progress, no procedural document will be sent (i.e., proposals for rectification) except in the event of statute of limitations.In this context, tax inspectors can still request documents or propose a telephone interview, but the company is allowed to answer that it cannot provide the requested documentation or explanation. It is likely that a draft-bill will follow in order to “crystallize” the consequences of failure to comply with deadlines in the various pending procedures. Moreover, at this stage, all tax litigations are postponed.
- No specific measures are planned with regard to declarations. The returns must therefore be filed within the usual deadlines.It is likely that the French government will implement the above-mentioned measures plus some other economic measures by legislative orders. Indeed, Article 7 of the Emergency Bill To Combat the Covid-19 Crisis – adopted on Sunday March 22 – authorizes the Government to proceed by ordinance to take any, direct or indirect, measure to assist individuals and legal entities engaged in economic activity and whose viability is threatened. All the details of the tax and social measures should therefore be provided by ordinance very soon.
MAIN ECONOMIC MEASURES ADOPTED BY THE AMENDING FINANCE ACT FOR 2020
The Amending Finance Act for 2020 (Project “AN n°2758) has been adopted by both the National Assembly (March 19th) and the Senate (March 20th). It establishes immediate measures in order to adjust the state budget to the Covid-19 circumstances, which notably include:
- A guarantee given by the State to secure loans up to a total amount of €300 billion This measure aims to appropriate new funds in order to tackle the covid-19 crisis. This €300 billion state guarantee to secure the repayment of loans granted between March 16 and December 31 of 2020 is one of the most noteworthy measures.This being said, to be eligible for the state guarantee, loans will need to satisfy several conditions including the following:
- the amortization of the loans will have to be deferred by at least one year;
- the borrower will be allowed to elect for a 5-year maturity extension;
- the lender must not reduce the amount of its commitment at the date the guarantee is granted compared to what it was as of March 16, 2020.
Additional conditions may be implemented by coming decrees.
- Technical leave measures – Companies can use the current epidemic as justification for placing their employees on “technical leave”, wherein employees are paid 70% of their gross salary by the employer (100% for employees paid at minimum wages). The employers will receive a government subsidy to cover the salaries paid to employees on technical leaves, up to a gross monthly salary of € 6,927.