How is French organic tax (C3S) calculated?

1. Businesses subject to C3S/Organic tax

Companies subject to C3S are SA, SAS, SNC, SNC, persons under public rights, foreign companies operating in France and GIEs (extract from the much longer list provided for in article L. 137-39 of the CSS). The C3S applies in mainland France but also to companies established in overseas departments such as Guadeloupe, Martinique, Réunion and Guyana.

On the other hand, several companies expressly covered by the texts are exempt from C3S. These include certain low-rent housing companies, condominium real estate companies, press editorial companies, maritime cooperative societies, etc. (see exhaustive list in article L137-31 of the CSS).

2. C3S/Organic tax amount

The C3S is calculated on the basis of the total turnover declared to the tax authorities under VAT. This turnover is calculated excluding turnover taxes and other similar taxes. Companies with a turnover of more than 19 million euros are required to file a declaration before May 15 online on the net-companes.fr site.

The rate is fixed at 0.16% as a matter of principle.

Thus, a company that generates a turnover subject to C3S of 30 million euros will in principle only be subject to C3S on a taxable basis of 11 million euros.

However, this rule is subject to several exceptions in order to limit the weight of the social solidarity contribution of companies for certain sectors.

In particular, the texts (non-exhaustive list) include:

• Credit institutions and financial companies on the basis of net banking income if the latter is equal to at most 10% of turnover. For these companies, the allowance of 19 million euros is taken into account to determine if the company is liable to C3S but it is not taken into account to determine the amount of tax, which may not exceed 1.6% of net banking income (GNP). If this capped rate is more favorable to the company, then it will be applicable as of right.

• Insurance, mutual insurance, and pension institutions. For these companies, the turnover used to calculate the social solidarity contribution of companies is that used in fiscal matters for the taxation of the contribution on the added value of companies (CVAE).

• Companies benefiting from reduced C3S rates. Some companies may benefit from reduced C3S rates in order to limit the amount of this tax taking into account the nature of their activity. The following companies are concerned by this device:
  • international and intra-community trading companies that make more than half of their purchases or sales tax-free on foreign markets and have a gross margin at most equal to 4% of their turnover excluding taxes;
  • international and intra-community trading companies carrying out commission transactions on an ancillary basis that meet the same conditions as those specified above;
  • wholesale fuel trading companies that have a gross margin of no more than 4% of their turnover excluding taxes;retail fuel companies that primarily carry out this activity and have a gross margin of no more than 4% of their turnover excluding taxes;
  • trading companies in the state of soil and livestock products, fertilizers and related products, which make more than half of their purchases or sales without taxes with agricultural producers or their cooperatives and which have a gross margin at most equal to 4% of their turnover excluding taxes.

‍

For these companies, C3S is due if their turnover exceeds €19,000,000. On the other hand, the allowance does not have to be taken into account in calculating the gross margin, or in the comparison between the latter and the turnover.

These companies benefit from a C3S rate then capped at 3.08% of the gross margin.

This reduced rate is applicable if it is more favourable than the standard rate. It is important to carry out simulations to determine what is the most attractive rate for society.

3. C3S/Organic tax basis

In principle, C3S declarations are automatically pre-filled by URSSAF Provence-Alpes-Côte d'Azur using data provided by the tax authorities. It thus identifies the turnover of businesses by summing the following lines of the CA3 declarations for the previous year:

- A1: Sales, services;

- E1: Exports outside the EU;

- E2: Other non-taxable transactions;

- F2: Intra-community deliveries to a taxable person (including intra-community transfers of goods).

If the amounts have not been pre-filled, the taxpayer must add the amounts himself from his CA3, CA12 (line 02, 03, 04 and 05A to 10) or from the income statement of his business.

These amounts may be subject to restatements:

• To declare the application of an derogatory regime such as the capping regimes specified above or the specific method of calculating turnover for insurance and reinsurance companies, mutual insurance companies or pension institutions;
• on the one hand, to add transactions, falling within the scope of VAT, that would have been omitted in VAT returns (distance sales of goods shipped for example from other Member States to France) or transactions included in ancillary lines but which would constitute turnover;
• on the other hand, to subtract certain operations:
  1. transfers of stocks of goods not intended to be sold in the other Member State or re-routed to France without having been sold;
  2. indirect consumption taxes and duties that have applied to certain products (medicinal products, perfumery products, beverages, petroleum products, gas);
  3. the amount of turnover constituting the basis of the so-called “wholesale” contribution payable by establishments selling pharmaceutical specialities wholesale and enterprises operating one or more pharmaceutical specialities;
  4. the amounts returned by the commissionaires to their principals established in the European Union. This last derogatory tax mechanism allows commissioners to limit the C3S base to the commission they receive, excluding principals established outside the European Union.

4. Special case of disclosed agent

Disclosed agent corresponds to an intermediary activity between two persons carried out by a person (the agent) for the benefit of one of the parties (the principal).

As a matter of principle, intermediaries do not become owners of the goods or provide the services with their own operating resources in connection with the transaction for which they act as intermediaries. They therefore differ from operators who make purchases to resell goods (distributor for example).

In terms of VAT, two types of intermediaries are recognized:

• disclosed agents who act in the name and on behalf of others;
• undisclosed agents who act in their own name but on behalf of others. The latter are similar to commission agents as defined by the Commercial Code.

We invite you to read our page dedicated to the concept of intermediary in order to find out more (link).

Undisclosed agents ("commissionnaire"), within the meaning of the Commercial Code, thus have a preferential regime allowing them to limit the C3S base to the margin provided they meet the following conditions:

1. the agent is paid by a commission fixed in advance;

2. the agent sends reports on the transactions carried out, indicating the price charged;

3. the agent does not become the owner of the goods and acts under a prior mandate;

4. the principal must have their place of business, a permanent establishment, their place of residence or their usual residence in the European Union.

This regime therefore makes it possible to limit the C3S base only on the margin earned on acquired transactions provided that the principal is established in the European Union.

5. Filing deadline and penalty

All companies liable, and only these, are required to fulfill their reporting and payment obligations by 15 May at the latest.

The declaration and payment of the C3S must be made exclusively by electronic means. Surcharges are applied to punish non-compliance with these obligations.

• The surcharges for late reporting amount to 10% of the contribution due.
• Late payment leads to the application of a 10% increase automatically increased by an increase of 4.8% per year or part of a year of delay.

However, free discount procedures allow you to benefit from a partial or total reduction of the surcharges that can be notified.

It is recommended to be accompanied by an expert in order to start these regularization procedures in compliance with applicable regulations in order to consider a total reduction of the penalties that could be charged to the Company.

6. How do I determine if my company is subject to C3S and how do I determine the amount of tax?

In order to ensure that its C3S obligations are properly fulfilled, the following steps should be taken:

• Does my Company have a form that allows it to be subject to C3S?
• If yes, does my Company have a turnover of more than 19 million?
• If yes, are the transactions carried out subject to C3S? It is important to conduct a detailed review of the transactions carried out in order to determine whether or not the Company is subject to C3S. In addition, certain transactions must be excluded from the C3S taxable base.

Can my company benefit from a reduced C3S rate? Or does my company meet the conditions of an opaque intermediary?

These various steps are fundamental in order to determine whether your company is actually subject to C3S but especially to determine the effective amount of tax. Indeed, by applying the various exclusion mechanisms or reduced rates, the amount of C3S can often be reduced.