As France seeks to become a premier European hub for crypto businesses, its taxation system has been structured to attract innovation and investments. The government and the population openly embrace the use of cryptoassets across the economic ecosystem, and therefore crypto entrepreneurs have plenty of opportunities to build and sustain their businesses.
In France, the General Directorate of Public Finances (DGFiP) is responsible for managing nationwide processes and tasks related to taxation and public accounting. The authority collects public revenues, issues interpretative instructions for general and specific taxation cases, as well as designs and imposes rules and procedures related to the control and payment of public expenditure. In line with AML/CFT regulations and rules for digital assets taxation, it also keeps records of crypto transactions carried out by private and public persons. For tax purposes, the DGFiP treats cryptoassets, including cryptocurrencies, as moveable assets, which is similar to the treatment of securities and bonds.
France has signed over 100 international agreements on the elimination of double taxation. They cover corporate and personal income taxes, social security contributions, and other payroll taxes. Interest, dividends, and royalties are taxed on the basis of preferential rates. Overall, these agreements provide foreign investors with greater security and allow for the optimisation of taxes, which leads to reduced burdens of obligations.
With the aim to encourage the growth of innovative startups, France also offers competitive taxation for businesses engaged in research and development (R&D) activities. Eligible businesses can receive an R&D tax credit, which is determined on the basis of the R&D expenses incurred during the calendar year. The available R&D tax credit is 30% of the eligible expenses incurred during the calendar year, which can reach up to 100 mill. EUR, and on certain occasions, an extra 5% beyond this amount can be granted. The tax credit for innovation expenditure is 20% of the eligible expenses, which can be up to 400,000 EUR per year.
Normally, expenses related to patent registration, depreciation of fixed assets, monitoring of technical developments, and insurance contracts are regarded as eligible R&D expenditures. The granted tax credit is offset against the Corporate Tax payable by the eligible business.
Furthermore, new businesses, that were established before the 31st of December 2022, that invest in R&D activities, and that have innovative startup (JEI) or university startup (JEU) status can avail of exemptions from several taxes.
The exemptions for new businesses are as follows:
- A total exemption from the Personal Income Tax or the Corporate Tax for the first financial year or the first period when they are taxed on profits (this may not be longer than 12 months), followed by a 50% exemption for the next year when eligible persons post a profit
- The Local Economic Contribution (CET) and the Property Tax for seven years following a decision by the local government
Categorisation of Crypto Traders
In France, different types of crypto traders are subject to varying taxes. Therefore, if you engage in such activities, take the time to determine which category your business falls within. The French tax legislation doesn’t specify how to decide whether the activity is carried out occasionally or on a regular basis, and it’s determined on a case-by-case basis. The authority normally takes such factors as the total invested amount, the total trading volume, and the frequency of transactions into consideration.
The DGFiP categorises crypto traders as follows:
- Occasional traders – a Single Fixed Levy (PFU) or flat tax, at the rate of 30% which consists of 12.8% Personal Income Tax and 17.2% Social Security Contributions (earners of high income may be obligated to pay an additional 4%)
- Professional traders – Industrial and Commercial Benefits (BIC) tax at the rate of 0-45% is levied on capital gains associated with regular crypto trading activities
It’s worth noting that slightly different tax rules apply to crypto mining, which is subject to Non-Commercial Profits (BNC) tax at the rate of 45%. If the turnover during the previous year doesn’t exceed 70,000 EUR, crypto miners are eligible for Micro BNC tax, which means that only 66% of the income is subject to the tax.
Under certain conditions, occasional traders can choose the progressive tax rate. If you wish to explore these categories further and determine your specific case, please reach out to our dedicated legal team here at Regulated United Europe (RUE).
In France, the standard Corporate Tax rate is 25%. Tax resident companies are subject to paying tax on their income sourced in the territory of France, while income sourced from foreign business activities is generally excluded from the French tax basis. Non-resident companies are subject to paying the French Corporate Tax on income sourced through business activities carried out in France or through French Permanent Establishments (PEs), as well as on income sourced from real estate located in France. The tax residence is generally determined by identifying whether a company is incorporated under French commercial laws.
Small and medium-sized companies (SMEs) whose turnover doesn’t exceed 7,63 mill. EUR, are eligible for a reduced 15% rate levied on the first 42,500 EUR of profit. Another important condition is that the company’s share capital has to be fully paid up, and at least 75% of this capital must belong to natural persons.
Capital Gains Taxation
Since the DGFiP treats cryptoassets as moveable assets, they are subject to capital gains taxation. In France, moveable assets are subject to Capital Gains Tax and Social Charges. The Capital Gains Tax is applicable to residents and non-residents of France, and under certain conditions, it can slice off around 40% of the profit made upon the sale or transfer of cryptoassets. The sale happens when cryptoassets are sold for fiat currency.
The Capital Gains Tax rate applicable to profits sourced from crypto varies depending on the frequency of your trading activities. The flat Capital Gains Tax rate is 19%, and the Social Charges rate is 17.2% which amounts to 36.2%. Fortunately, taxpayers can also avail of various tax allowances and even be tax-exempt, provided that they meet certain requirements.
With regard to the Capital Gains Tax, crypto-to-crypto transactions (trading one cryptoasset for another) aren’t deemed taxable events. It means that such DeFi transactions as crypto staking, crypto mining, lending, borrowing, or liquidity pools don’t trigger liability for the Capital Gains Tax.
In France, the standard VAT rate is 20% which is in line with the EU directives and is levied on products and services sold in France. Not every crypto-related activity is subject to tax, however, most French companies are obligated to register as VAT payers if their supplied products are worth more than 34,600 EUR or their supplied services are worth more than 86,900 EUR.
In accordance with the decision of the Court of Justice of the European Union (CJEU), crypto exchange services (including exchange into fiat money) aren’t subject to VAT as they fall within the category of financial services for VAT purposes.
Mining isn’t subject to VAT either due to the absence of a contractual relationship between the supplier and the customer. Also, when a VAT payer carries out mining activities, there is no eligibility for a VAT deduction from any related expenses (such as technical equipment or electricity consumption used for the mining activities).
European and Global Tax Regulations
France is a member of various European and global organisations which set taxation standards that usually replace national rules and consequently increase taxation efficiency, consistency, and transparency. Therefore, French crypto businesses should carefully examine the European and global regulations in order to duly fulfil their taxation obligations.
The EU’s Directive on Administrative Cooperation (DAC) is designed to ensure fair and efficient taxation across member countries. It’s set to cover the reporting and exchange of information between the EU’s tax authorities involving income or revenue generated through cryptoassets by EU residents. It’s aligned with the Markets in Crypto-Assets (MiCA) regulation and relies on MiCA’s authorisation requirements, which prevents cryptoasset service providers from facing additional administrative burdens.
Moreover, DAC8 is also consistent with the Crypto-Asset Reporting Framework (CARF), recently approved by the Organisation for Economic Cooperation and Development (OECD), which also includes amendments to its Common Reporting Standard. The purpose of this framework is to raise crypto taxation and tax reporting standards by introducing automatic tax reporting and taxpayer information sharing between international authorities. The CARF standards are applicable to natural and legal persons that provide services pertaining to crypto exchange (including fiat money), and crypto transfers.
If you’re preparing to develop a sustainable crypto business in France, our team of dedicated and quality-focused legal consultants here at Regulated United Europe (RUE) will be delighted to provide you with tailored, value-added support in structuring your taxes in accordance with local and international rules. We also offer French crypto company formation, crypto licensing, and financial accounting services. Contact us now to book a personalised consultation.
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