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Legal news 04 March 2021

Key tax measures included in the 2021 French Finance Law

By Ydès

The 2021 French Finance Law, enacted on December 29, 2020, provides tax measures that may affect multinational companies with French subsidiaries or establishments in France.

Some of these measures aim at supporting businesses in the context of the economic crisis due to Covid-19 pandemic.

Here is a summary of the most relevant provisions.  


Neutralization of the tax consequences of assets revaluation

The Finance Law for the year 2021 introduces a temporary and optional measure enabling businesses to avoid an immediate taxation of capital gains arising from the voluntary revaluation of assets.


  • For non-depreciable assets, taxation is deferred until the sale of the assets.
  • For depreciable assets, taxation is spread over a period of 5 to 15 years depending on the nature of assets. In case of disposal, the capital gain resulting from the revaluation not yet taxed become immediately taxable.

This tax neutralization regime is applicable to first revaluations made during fiscal years ending between December 31, 2020 and December 31, 2022.


Re-introduction of the spreading of capital gains in case of sale and lease-back of real estate assets

The “sale and lease-back” is an operation by which a company sells its professional real estate property to a real estate leasing company (lessor) and immediately becomes the tenant (lessee) of the same real estate property under a long-term lease agreement.  The benefit of this mechanism is to enable company owners and users of their premises to obtain immediately available funds via the sale of their real estate assets whilst retaining the use of the premises. The lease finance agreement includes a purchase option enabling the assigning company to repurchase its premises, during or at the end of the agreement.

In order for the taxation not to deter companies from using this mechanism, the Finance Law for 2021 reintroduced a measure allowing the spreading of the capital gains from the sale of the premises to the real estate leasing company, with few adjustments. A similar regime had already been established in 2009, following the financial crisis in 2008.

When this option is exercised, the capital gains from the sale of the premises is not taxed in full the fiscal year of the disposal but is equally spread throughout the duration of the lease agreement, for a maximum period of fifteen years.

Accordingly, this mechanism enables companies to neutralize the reintegration of the portion of the capital gains incrementally with the deduction of the finance lease rents.

This optional regime applies to sales of real estate assets made to real estate leasing company between January 1, 2021 and June 30, 2023 and preceded by a finance agreement accepted by the lease finance lessee on September 28, 2020, and at the latest on December 31, 2022.


Reduced corporate income tax rate

The reduced rate of 15% on the first 38 120 € of taxable result is enlarged to entities with an annual turnover of 10 M€ of euros. This measure is a new step in the corporate income tax reduction’s trend in France.

The table below summarizes the applicable corporate income tax rate per year.


Fiscal Year
Turnover of the entity Taxable Basis 2020 2021 2022
Turnover < 7,63 M€ 0 to 38 120 € 15% 15% 15%
> 38 120 € 28% 26,50% 25%
7,63 M€ < Turnover < 10 M€ 0 to 38 120 € 28% 15% 15%
> 38 120 € 26,50% 25%


Rent waivers

Landlords having concluded professional or commercial lease agreements with unrelated tenants can fully deduct rent’s waivers granted from April 15, 2020 until June 30, 2021 (instead of December 31, 2020).

Landlords can also benefit from a tax credit on rent waivers granted for the month of November 2020 provided that some conditions are met.


Decrease of local taxes

In France, there is a territorial economic contribution (“Contribution Economique Territoriale” or “CET”) which is composed of two different taxes:

  • The companies’ land contribution (« Cotisation Foncière des Entreprises » or « CFE »)
  • The value-added contribution (« Cotisation sur la valeur ajoutée des entreprises » or « CVAE »)

From 2021, the CVAE rate is decreased by 50%.

The ceiling of these two taxes (CVAE and CFE) is lowered from 3% to 2% of the value-added produced by companies.  

Exemptions can apply for new facilities or in case of extensions of existing ones.


Overview of the main VAT measures

  • The VAT group (VAT consolidation regime) will be implemented in France as from 2023 for options exercised in 2022
  • The entry into force of the rules modifying the VAT regime for e-commerce is postponed to July 1st, 2021
  • The VAT treatment of bundled / composite services is clarified
  • E-invoicing obligations will be enlarged, and e-reporting obligations will be introduced gradually from 2023 to 2025.


For more information, please contact Frédéric Plottin (f.plottin@ydes.com), Edouard Rabatel (e.rabatel@ydes.com) or Julien Charnay-Rousset (j.charnay-rousset@ydes.com)