CICE tax credit – Background
To signicantly decrease the cost if labor on medium & low wages and and allow Corporate France to garner again market shares worldwide, the French gouvernment enacted in 2012 the CICE tax credit.
Who can benefit from the CICE tax credit?
The entity needs to pay corporate tax in France. Liaison offices cannot file this wage tax credit as they are not subject to corporate tax. Also see tax credits – what you need to know
And how does the CICE tax credit work ?
The base of calcultation….
The CICE can be claimed for all salaries which are 2.5 lower than the French minimum wage (SMIC). If the wage is higher than 2.5 SMIC, the branch or subsidiary cannot claim any CICE tax credit at all.
For a employee paid all over the 2018 calendar year on a fulltime basis (that is 1 820 legal work hours), this means the wage must not overtake 44 940 €. If a entity employed a person less than one year and/or on a part-time basis, it needs to adjust the threshold accordingly.
For instance, if a company clerk employed 50% of the legal duration of work over one calendar month, its needs to compare his or her pay to 1 872.50 € (44 940/12*50 %) to ensure whether his salary is eligible to the CICE tax credit.
The rate is 6% for salaries paid over the current calendar year. Hence, the maximum tax credit the company can claim per employee over 2018 amounts to 2 696 € (44 940*7%).
The tax credit can be applied to the tax bill of the year. The excess of CICE tax credit over the tax bill is immediately refundable if the entity (together with the parent company and sister company) is considered as a SME. Otherwise, it has a 3-year carryforward. After this 3-year period, it becomes refundable.
If the fiscal year of the company differs from the calendar year, the entity can claim a refund only for the past calendar year. For instance, a subsidiary whose fiscal year ends as of 10/31/2017, can claim the CICE tax credit for salaries paid over 2016 only. It has to wait for the 10/31/2018 close to claim that of the 2017 calendar year.
…and its Economical effect
Given the fact it is a non-taxable profit, its ecominical effect overtakes 6%. Assuming a standard tax rate of taxation (33/1/3% in 2018), its actual relief amounts to 9% of the gross salary, or 6.4/% over the overall cost of labor.