French Parliament Ratifies Bill To Support DOMs

by Ulrika Lomas, Tax-News.com, Brussels

03 June 2009

The French National Assembly has recently ratified a bill for the economic development of French overseas territories, containing a variety of tax measures designed to support companies, boost sustainable employment and stimulate the construction of social housing.

One of the corner stones of the law is the creation of ‘zones franches d’activités’ or ZFA, designating a series of tax advantages for each overseas department, intended to benefit companies from a wide range of economic sectors, thus enabling them to improve their performance and increase their competitiveness.

These tax advantages will grant eligible companies a 50% reduction of their taxable base for corporate and undeveloped land tax, or an 80% reduction for local business tax. However, reductions for corporate or local business tax have been capped at EUR150,000.

Certain territories (Guyana, the southern islands of Guadeloupe and areas of the Réunion Island) and priority sectors (research and development, tourism and the environment) will be entitled to an 80% reduction of their taxable base for corporate and undeveloped land tax, and a reduction of 100% for local business tax, with reductions then capped at EUR300,000.

Regarding reductions in local business tax and undeveloped land tax, the law provides that local authorities may refuse to implement the measure. Nevertheless, local authorities electing to grant the reductions will receive financial compensation from the State.

The creation of the ZFA is a temporary measure, in force until 2019. In order to benefit from the tax reductions, companies must commit to investing in professional development.

Among other initiatives contained in the law, also designed to support businesses, are measures to facilitate the employment of middle-grade managers and young people in particular, by exonerating employers from very small companies and companies in priority sectors from their social contributions. In addition, any companies experiencing financial difficulties as a result of the on-going global economic crisis may request a moratorium on their social contributions.

The French government also intends to facilitate access onto the property ladder, through tax deductions accorded for the purchase of a first main residence. The restoration of old properties may also entitle individuals to tax reductions.

Finally, in order to lower the price of telephone communications, and to facilitate internet access, the law provides a measure to reduce tax on undersea cables.

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