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June 8, 2021

French Government issues draft Amending Finance Bill for 2021

Executive summary

On 2 June 2020, a first draft of the Amending Finance Bill for 2021 (the draft Bill) was presented before the French Council of Ministers. The draft Bill will be discussed by the French Parliament over the coming weeks and may be subject to amendments.

This Alert summarizes the main corporate tax provision relating to companies in the draft Bill. The draft Bill proposes to temporally ease conditions related to the carryback mechanism applicable to tax losses.

Detailed discussion

Under Section 220 quinquies of the French Tax Code, companies subject to corporate income tax (CIT) that have generated tax losses during a given fiscal year (FY) are able to opt for the carryback of those tax losses and use them to offset their taxable profit of the previous FY, within the limit of €1 million and subject to other conditions.1 Such a mechanism results in a credit equal to said carried-back losses multiplied by the current standard CIT rate which can be used to reduce the CIT payables of the following five years, with the balance, if any, being refunded at the end of the fifth year.

In order to improve the financial situation of companies impacted by the COVID-19 pandemic, the draft Bill proposes to exceptionally allow the carryback of tax losses generated during a FY ended between 30 June 2020 and 30 June 2021 and use those losses, without limitation in the amount, to offset the taxable profit of the three previous FYs (subject to the same other conditions noted above for the existing mechanism, as well as to some specific ones applicable, in particular, in the case of a French tax consolidation and/or if a company has already opted, pursuant to the existing mechanism, for the carryback of its tax losses of the FY). The CIT rate to be used to determine the corresponding credit would be the one applicable to FYs starting on or after 1 January 2022, i.e., generally 25%.

The option to benefit from the exceptional carryback mechanism provided by this new measure would have to be made by the expiration date of the deadline to file the tax return for a FY ended on 30 June 20212 and no later than the settlement (i.e., the final payment) of the CIT liability of the FY following the one for which said option is made.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Société d’Avocats, Paris

Ernst & Young LLP (United States), French Tax Desk, New York

Ernst & Young LLP (United States), Financial Services Desk, New York



  1. Notably, tax losses generated during a given FY can only be offset against the undistributed profits of the prior FY and against profits that have been subject to CIT at standard CIT rate and that resulted in a CIT cash payment.
  2. 30 September 2021.

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