This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
The French tax authorities (FTA) on 1 March 2023 updated their guidelines regarding the process for offsetting foreign tax credits against the French social surcharge (BOI-IS-AUT-10-30).
As a reminder, companies whose turnover exceeds EUR 7.63 million and whose corporate income tax liability exceeds EUR 763,000 are subject to a 3.3% social surcharge on corporate income tax (“contribution sociale sur l’impôt sur les sociétés,” article 235 ter ZC of the French Tax Code).
In principle, companies may not offset their tax credits (e.g., research tax credit (CIR) or collaborative research tax credit (CICO)) against their social surcharge.
However, the FTA had softened its position and had stated in prior guidelines that foreign tax credits (i.e., tax credits provided by tax treaties concluded by France) could be offset against both French corporate income tax and social surcharge, first against corporate income tax and then against the social surcharge.
In its updated guidelines, the FTA further softened its position: companies now may freely determine the order in which they offset their foreign tax credits against their corporate income tax and their social surcharge.
