Tax Alert – Local taxes of companies having industrial premises in France, 11/03/2021

 

Property tax on developed land (i.e., “taxe foncière sur les propriétés bâties”, or TFPB) is levied annually on developed land situated in France. The tax accrues to départements, communes and their public establishments for intercommunal cooperation. Taxable property includes permanent constructions perpetually attached to the ground such as premises intended to accommodate people (residential properties) or business assets (workshops, sheds), certain civil engineering structures and transport routes, land immediately necessary for such constructions, etc. Business premises contribution (i.e., “cotisation foncière des entreprises”, or CFE) has the same tax base.

By exception, no tax is levied where there is entitlement to temporary exemption or permanent exemption (for example, in case of industrial assets etc.). For the latter, the scope of the exemption provided by section 1382, 11° of French tax code related to industrial fixtures, equipment and tooling was extendedby the Supreme Administrative French Court (Conseil d’Etat, December 11, 2020, « SA GKN Driveline »), leaving a clear path for enterprises to obtain tax refunds of property tax and business premises contribution.

WHO IS CONCERNED?

Any enterprises with industrial premises may be concerned. In particular, those for which the tax base is assessed on the accounting value of the assets (property tax form “Modèle-U”) as provided by sections 1499 to 1500 of the French tax code.

As a reminder, there is no legal definition of industrial premises. To establish the distinction with other premises (in particular, business premises), both administrative guidelines and law cases use the criterion of the significancy of the industrial equipment compared to other equipment.

WHAT WAS RULED BYT THE COURT?

Since 2013, the permanent exemption for industrial fixtures, equipment and tooling materials should be granted where there were directly involved in the industrial activity (functional criterion); and be removable from the buildings (physical criterion).

The French Supreme Administrative Court overruled those two-criterion approach allowing the exemption to be applied regardless the removability from the buildings and the direct implication in the industrial process. The exemption is now solely subject to the fact that the industrial fixtures, equipment, and tooling materials are “specifically adapted to the activities carried out in such industrial premises”.

WHAT IS THE MAIN OUTCOME?

First, industrial fixtures, equipment and tooling materials that were not previously of a removable nature will now be eligible for the exemption. These include, for example, industrial ovens, tanks, cooling circuits, pits, platforms, overhead cranes, etc. Finally, the redefinition of the functional criterion makes it possible to exempt materials that are not directly involved in the industrial process, such as fire safety installations and other air handling units.

WHAT COULD BE DONE?

The concerned companies must carry out a complete audit of their industrial fixtures, equipment, and tooling materials for property tax purposes.

In the event of identification of installations newly covered by the exemption, companies must file tax claims to obtain property tax/business premises contribution refund of as from FY2020 or to dismiss the potential tax reassessment in this regard, should they not be time-barred (previous tax audits leading to a tax reassessment issued in 2020 can be claimed until December 31st, 2021).

WHAT COULD BE DONE?

Jeantet is one of the leading independent French business law firms that delivers customized services with added value and:

  • may perform an in-depth tax base audit with respect of property tax / business premises contribution;
  • may file the tax claims to obtain tax refunds (TFPB/CFE);
  • can monitor the application of the newly-reduced tax bases for the future, especially with French tax authorities.

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