In our experience, taxe professionnelle is a tax often inadvertently
overlooked. Most people assume that it does not apply to them. This is a
mistake. If you are running a business (as defined by French law, so it may
include activities which you did not think were "businesses") you are taxable.
Notably, this includes if you have registered as a commerçant, and consider your
gîtes to be business property for capital gains tax purposes.
Do we have a similar tax in the UK ?
Yes. We know it as business rates. Rather like in the UK, the taxable basis is calculated according to a national formula, but the rate applied to that basis is decided locally.
Can you give me a guide as to how much it is ?
No. Firstly, a tranche is taken by each région (e.g. Limousin – 3.33%), each département (e.g. Corrèze – 11.39%) and each commune (e.g. Brive-la-Gaillarde – 20.32%). So the rate applied to a business is assessed at three levels and then accumulated to give the total rate (in the above (real) example, 35.04%). Secondly, the rates differ vastly across France. As a very broad rule of thumb, the more desirable areas have lower rates, but in those areas the average taxable basis is concomitantly higher, as we will see below.
Is there a basic definition of business ?
Yes - anyone who exercises a habitual professional activity, but is not salaried. A company paying corporation tax (not all companies do) is liable corporately. Others are liable personally.
Are any businesses exempt ?
Yes. In the typical French way, there is a long list (some 15 categories !) of the permanently-exempt and a shorter list of the temporarily-exempt. Of particular interest may be the exemptions for certain artistes, and for those who let certain property.
Can you elaborate on the exemption for lettings ?
Yes. If (a) the letting is one-off and/or non-regular and concerns only part of the owner’s principal or holiday home; or (b) the letting is regular but is of part of the owner’s principal home and the rent is "reasonable"; or (c) all or part of the owner’s home is let as a "gîte rural" (see below) or a "meublé de toursime" or in some other way it is not taxable. The local authority may contest such exemption.
What is a "gîte rural" ?
A residence which is so classified under French law and is not the main or holiday home of its owner.
How is the taxable basis calculated ?
Firstly, three figures are added together. The first is the cadastral value of the business premises, the second is the sum of 16% of the value of the business’s fixed assets and the third is any rent paid for other business equipment. The second and third figures are then reduced. For small businesses, the second and third figures may be ignored.
Secondly, various deductions are made for businesses which employ extra people, invest, etc.
Thirdly, the resulting figure is reduced by 16%.
Is there a limit on the tax payable ?
Yes. Happily, a business’s liability is capped. For the vast majority of those reading this article, it is capped at 3.5% of the value added in the last accounting period. Value added in calculated broadly in the same way as for VAT (although the business may not be liable to pay VAT) by calculating income minus outgoings.
Do I have to register ?
You are taxable for any year when the business operates at 1st January. If your turnover is over under €61,000 or €152,500 according to your type of business, you generally have to submit a simplified return (1003 S) by 1st May to every commune where the business operates. This declaration is used to calculate your tax liability for the following year. You should make enquiries well in advance at your local Mairie.
More philosophically, what is the impact of taxe professionnelle in France ?
According to the French government, French local government derives 45% of its income from the tax and thus a large part of its independence from Paris depends on it. You can therefore expect zealous collection of it ! However, it has become apparent that disproportionate burden is falling on certain sectors compared to their wealth creation and a working party has therefore been set up with a view to reform in the near future.
Sykes Anderson LLP can advise on the likely impact of taxe professionnelle and the applicable rate in the area you are thinking of buying or have bought. You can contact them at email@example.com or call 020 7398 4700. http://www.sykesanderson.com/
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In our experience, taxe professionnelle is a tax often inadvertently overlooked. Most people assume that it does not apply to them. This is a mistake. If you are running a...