French General Tax Code
In forceI.-In the priority development zones defined in II, companies that are created between 1 January 2019 and 31 December 2023 and that carry out an industrial, commercial or craft activity within the meaning of Article 34 are exempt from income tax or corporation tax on profits made, with the exception of capital gains recorded on the revaluation of assets, until the end of the twenty-third month following that of their creation and declared in accordance with the procedures set out in Articles 50-0 et 53 A.
Profits are only subject to income tax or corporation tax for one quarter, half or three quarters of their amount depending on whether they are made, respectively, during the first, second or third twelve-month period following this exemption period.
II.-.Communes located in regions of mainland France are classified in a priority development zone when these regions cumulatively meet the following conditions:
1° They belong to the third of the regions with the highest poverty rate;
2° They belong to the third of the regions with the highest proportion of young people aged 15 to 24 neither in employment nor in training;
3° They belong to the third of the regions with the lowest population density per square kilometre;
4° At least 30% of the population of the region lives in public establishments for inter-communal cooperation with their own tax system that cumulatively meet the following conditions:
a) They belong to the third of the public establishments of inter-municipal cooperation with the highest poverty rate;
b) They belong to the third of the public establishments of inter-municipal cooperation with the highest proportion of young people aged 15 to 24 neither in employment nor in training;
c) They belong to the third of the public establishments of inter-municipal cooperation with the lowest population density per square kilometre.
The poverty rate refers to the proportion of the population whose income is less than 60% of the median income.
The data used are drawn up by the National Institute of Statistics and Economic Studies from those available on 31 December of the year preceding the year of the classification. The population taken into account is the municipal population defined in article R. 2151-1 of the General Local Authorities Code in the version in force on the date of publication of the loi n° 2018-1317 du 28 décembre 2018 de finances pour 2019.
The classification of communes as priority development zones is established on 1 January 2019 and for a period of five years by joint order of the ministers in charge of the budget and territorial cohesion.
III.-.To benefit from the exemption mentioned in I, the company must meet the following conditions:
1° The company is a small or medium-sized enterprise within the meaning of Annex I to Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty;
2° The company's registered office and all of its business and operating resources are located in the areas mentioned in II.
When a company carries out a non-sedentary activity, carried out in part outside the aforementioned areas, the location condition is satisfied if it achieves no more than 15% of its turnover outside this area. Beyond 15%, profits made are subject to income tax or corporation tax under the conditions of ordinary law in proportion to the turnover made outside the aforementioned areas. This turnover condition is assessed on a financial year by financial year basis;
3° Its capital must not be held, directly or indirectly, for more than 50% by other companies.
The capital of a newly created company is held indirectly by other companies when at least one of the following conditions is met:
a) A shareholder holds a de jure or de facto management or supervisory position in another company, where the latter's business is similar to or complementary to that of the newly created company;
b) A shareholder holds, together with the members of his tax household, at least 25% of the corporate rights in another company whose activity is similar to that of the newly created company or is complementary to it;
4° The company is not created as part of a takeover, transfer, concentration, restructuring or extension of pre-existing activities.
The existence of a contract, whatever its name, whose purpose is to organise a partnership characterises the extension of a pre-existing activity when the newly created company benefits from the assistance of this partner, in particular as regards the use of a sign, a commercial name, a brand or know-how, supply conditions, administrative, legal, commercial or technical management methods, under conditions such that this company is placed in a situation of dependence.
IV.-When it meets the conditions required to benefit from the provisions of one of the schemes provided for in articles 44 sexies, 44 sexies A, 44 octies A, 44 duodecies, 44 terdecies, 44 quindecies or 44 sexdecies and the scheme provided for in this article, the taxpayer may opt for the latter scheme within six months of starting business. The option is irrevocable and entails definitive renunciation of the other schemes.
V.-In regional aid areas, the benefit of the exemption is subject to compliance with Articles 13 and 14 of the aforementioned Commission Regulation (EU) No 651/2014 of 17 June 2014.
Outside regional aid areas, the benefit of the exemption is subject to compliance with Article 17 of the same regulation.
