Finance law for 2022

By Carine duchemin, Partner and Line Poberznick, intern

The finance law for 2022, published in the Official Journal of December 31, 2021, in a pre-electoral context, does not include exceptional measures and is content for the most part to develop a certain number of measures, both in terms of personal and professional taxation. 

Nevertheless, four tax measures caught our attention

  • The introduction of a temporary amortization regime for goodwill 
  • The development of the regime for the sale of digital assets 
  • The option for individual entrepreneurs to assimilate to an EURL, or an EARL, and therefore to be subject to corporation tax, and
  • In terms of VAT, the compliance of article 269, 2-a of the CGI with European Union law.

POSSIBILITY OF DEDUCTING TAX DEPRECIATION OF ACQUIRED BUSINESS FUNDS

Depreciation of goodwill acquired between January 1, 2022 and December 31, 2025 may be deducted for tax purposes

Component of the goodwill, the commercial funds is, according to the General Chart of Accounts, mainly made up of customers, the trade name, trade name and market shares (article 212-3 PCG). It is presumed to have an unlimited duration of use, but this presumption can be reversed when there is a foreseeable limit to its use. 

The measure applies to companies subject to corporation tax as well as companies subject to income tax according to the actual regime and whose results come under the BIC, since they are required to comply with the rules of the PCG. Craftsmen are not concerned by this measure, as are the liberal professions.

The terms of acquisition goodwill are, a priori, indifferent. Indeed, the concept of acquisition should be understood in the broad sense, whether it is an acquisition for consideration or by contribution. 

All goodwill amortized in accounting can benefit from this tax deduction. Are therefore deductible amortization spread over 10 yearsgoodwill acquired by small businesses (without needing to justify a limited period of operation), as well as the depreciation applied by any company, regardless of its size, as long as it justifies a foreseeable limit to the exploitation of the fund (for example, goodwill backed by a contract or a legal authorization having a limited duration). The amortization period of the fund must then correspond to the duration planned for its operation. 

Furthermore, in the event that the amortized goodwill is subject to impairment provision.

This provision is charged to income, in installments, over the remaining amortization period for an amount equal to the difference between: 

  • The amortization that would have been applied if the provision had not been recognized
  • Amortization actually recognized at the end of the financial year 

Consequently, in practice, the tax deduction of the total cost of goodwill can only be ensured by the recognition ofAccelerated depreciation. The amount of the provision for accelerated depreciation to be recognized would be equal to the tax reintegration applied for the provision for depreciation at the end of each financial year.

ADJUSTMENT OF THE TAX REGIME FOR DISPOSALS OF DIGITAL ASSETS

Two tax regimes for the sale of digital assets will be possible for gains made from 1er January 2023.

Individuals who carry out transactions on an occasional basis as part of the management of their assets will have the choice between taxation of their gains at the "flat tax" of 30% (i.e. 12.8% tax on the capital gain and 17.2% social contributions), and an option for progressive scale taxation. In the event of an option, all the capital gains from the sale of digital assets of the tax household will be taken into account in the overall net income (article 200 of the CGI).

Individuals who exercise professional manner an activity of buying and selling digital assets will now be taxed according to the BNC regime, and no longer BIC. The professional nature will no longer result only from the "habitual" nature of this purchase-resale activity, but from the means used for this activity. Thus, taxpayers benefiting from preferential transaction fees given their transaction volumes, those who use professional tools or complex trading practices could be concerned.

POSSIBILITY FOR INDIVIDUAL ENTREPRENEURS TO OPT FOR CORPORATION TAX

The finance law provides for the tax consequences of the new single status of the individual entrepreneur. From the entry into force of this status, the individual entrepreneur may opt for assimilation to the EURL (or EARL), and thus opt for corporate tax.

The new paragraph of article 1655 sexies of the CGI provides for this irrevocable option, the terms of which will be specified by decree. This option will allow individual entrepreneurs carrying out a taxable activity in the BIC, BNC or BA category, automatically or optionally covered by an effective tax regime, to opt for their assimilation for tax purposes to an EURL or an EARL

The individual entrepreneur will be taxed according to the corporate tax system. The provisions relating to corporation tax will apply to it, however, it will be exempted from the registration formalities provided for in articles 635, 1-5° and 638 A of the CGI in the event of the formation or transformation of a company or increase in capital. 

The exercise of this option should have the effect of entailing the consequences of a termination of business. When the option is exercised, the assets of the private assets will be transferred to the professional assets according to article 151 sexies of the CGI. This transfer will benefit from the migrant property regime which makes it possible to defer the taxation of capital gains until the transfer of the property. 

Thus, during the disposal, two capital gains will be determined: 

  • All employees are eligible to the partial activity scheme: professional added value corresponding to the capital gain acquired on the property between its allocation to professional assets and its disposal 
  • All employees are eligible to the partial activity scheme: private added value corresponding to the amount of the added value acquired by the property during the period of belonging to the entrepreneur's private assets

In addition, the withdrawal of an asset from professional assets and its transfer to personal assets generates a capital gain or loss which will be taxable under the common law regime for professional capital gains. 

Corporate tax liability results from article 1655 sexies, 3 of the CGI. This option is revocable until the fifth following financial year. On the other hand, once revoked, it will be impossible to opt again. Also, a waiver is considered a case of termination of business.

In practice,this option is of interest to entrepreneurs whose average income tax rate exceeds that of corporate tax (i.e. 15% up to €38 and 120% above). The subjection to the IS also allows the deduction from wages paid to the entrepreneur and their taxation according to the rules of salaries and wages.

Profits reinvested in the business will no longer be taxed in the hands of the entrepreneur, but those "distributed" to him will be treated as dividends. They will therefore be taxed at the same time with the IS and the income tax. It should be noted in passing that these dividends will enter into the base of his personal social contributions and contributions for their fraction exceeding 10% of the amount of the net taxable profit (however, this will not concern self-employed workers covered by the micro-social scheme).

This system will enter into force at the same time as the new article L. 526-22 of the Commercial Code which establishes the unique status of the individual entrepreneur.

COMPLIANCE OF ARTICLE 269, 2-A OF THE CGI WITH EUROPEAN UNION LAW

The French legislator draws the consequences of the case law of the Administrative Court of Appeal of Nantes and adapts thearticle 269, 2-a of the CGI, regarding the VAT liability of a deposit, to bring it into line with EU law.

As part of a delivery of goods, VAT is payable at the time of delivery thereof. This provision is not changed. 

However, in accordance with the decision of the Nantes CAA of May 28, 2021 (n° 19NT03579), when a advance payment is paid upstream of the delivery of the goods, the VAT will be payable at the time of collection thereof and up to its amount. Indeed, this judgment had affirmed that the provisions of article 269, 2-a of the CGI were incompatible with the objectives set by article 65 of the European VAT directive.

This measure will allow companies paying installments to deduct VAT earlier on their purchases and avoid having to bear a cash charge.

This new provision does not modify the special regime relating to the liability of VAT concerning certain deliveries of goods listed in article 209 of the CGI and for which special rules are provided (delivery of electricity, gas, self-delivery of new buildings or building works, etc.).

Finally, this provision will apply to installments received from January 1, 2023. 

Carine Duchemin

Carine duchemin

Partner

Within the Tax department, Carine Duchemin works in mergers and acquisitions, in the restructuring of companies and groups. She has an important international activity as adviser to international groups, particularly in the hotel industry. Carine Duchemin also assists companies and their managers with tax audits and litigation.