France: Second Amended Finance Bill Includes Corporate Tax Changes

As part of a package of austerity measures introduced in late August, Prime Minister François Fillon announced a modification of the rules governing loss carry forwards which will impact company cash flows.

The use of tax losses will now be limited as follows: 

• The period in which tax losses can be carried back for tax purposes has been reduced from three years to one. 
• Carry forward of losses is limited to 60% of the current year profit in a given offsetting year, with a limitation applicable to the portion of profit exceeding €1 million. Previously, losses of French companies carried forward for tax purposes could be offset without limitation against profits of a given year.

These measures will apply to fiscal years ending from the enactment of the 2011 Amended Finance Bill, which is expected by the end of September.

The Bill also includes a provision to reduce the capital gain participation-exemption scheme from 95% to 90%, applicable to FYs begun after 1/1/2011.