French General Tax Code
In forceI. Companies subject by right or by option to an actual system of taxation of their results and which carry on an industrial, commercial or craft activity within the meaning of article 34 are exempt from income tax or corporation tax on profits made, excluding capital gains arising on the revaluation of assets, until the end of the twenty-third month following the month in which they were created and declared in accordance with the procedures set out in l'article 53 A. The exemption also applies to companies subject to corporation tax that carry on a professional activity, within the meaning of 1 of l'article 92, where the number of employees benefiting from an employment contract of indefinite duration or a duration of at least six months is equal to or greater than three employees at the close of the first financial year and during each financial year of the period of application of this article. If the number of employees varies during the financial year, it is calculated taking into account the length of time the employees concerned have been with the company during the financial year. Profits are only subject to income tax or corporation tax for one quarter, one half or three quarters of their amount depending on whether they are made during the first, second or third twelve-month period respectively following this exemption period.
The benefit of this article is reserved for companies that are set up from 1 January 2007 until 31 December 2023 in regional aid areas, provided that the registered office and all of the business and operating resources are located in these areas.
When a company carries out a non-sedentary activity that is partly carried out outside the aforementioned areas, the location condition is deemed to have been met if it achieves no more than 15% of its turnover outside these areas. In excess of 15%, the profits generated are subject to income tax or corporation tax under the conditions of ordinary law in proportion to the turnover generated outside the aforementioned areas. This turnover condition is assessed on a financial year by financial year basis.
These provisions do not apply to companies engaged in banking, finance, insurance, property management or leasing, nor to companies engaged in maritime fishing activities created as from 1st January 1997.
The exemption remains applicable for its remaining duration when the commune in which the company is located leaves the list of communes classified as a regional aid zone after the date of its creation.
II. The capital of newly created companies must not be held, directly or indirectly, for more than 50% by other companies.
For the purposes of the first paragraph, 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, de jure or de facto, a management or supervisory position in another company, where the latter's business is similar to that of the newly created company or is complementary to it;
b-a shareholder holds with the members of his tax household at least 25% of the corporate rights in another company whose business is similar to that of the newly created company or is complementary to it.
III.-Companies created as part of a merger, restructuring, expansion of pre-existing activities or which take over such activities are not eligible for the scheme defined in I.
The existence of a contract, whatever its name, the purpose of which is to organise a partnership, characterises the extension of a pre-existing business when the newly created company benefits from the assistance of this partner, particularly in terms of 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. - The benefit of the exemption is subject to compliance with Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.
