Professional tax

The professional tax (TP) is one of the four local direct taxes perceived by the French territorial collectivities . It relates to only the companies, while the three others (Real estate tax on the built and not-built properties, Taxe of dwelling) are taxes supported by the households. It replaces the license. It was created by a law of July 29th 1975. The suppression of the TP was announced by the President of the Republic in January 2004, but this reform project of the TP still did not succeed, in particular because of the economic consequences that would have on the local public sector (first public investor in France, far in front of the State).

The TP accounts for 50% of the tax resources of the territorial collectivities. It is a tax perceived with the profit of the Communes of France, French Départements and French Régions and also (and more and more) with the profit of some EPCI.

Establishment of the TP

The TP is due by any French or foreign natural person or moral who carries on in France on a purely usual basis a non wage-earning community activity. The non-profit-making activities or with purely private goal are thus excluded. Some exceptions: are exonerated from TP the activities of General interest (exerted by the State, the territorial collectivities or of the association S), the agricultural activities, the artisanal activities under certain conditions.

Taxable amounts

Plate

Until 2002, the general information of the taxpayers was imposed on two elements: the Rental value of the buildings and others tangible fixed assets the debtor for his profession had; and (until 2002) 18% of the wages paid by the company. This Partie wages does not exist today any more, it was gradually removed between 2000 and 2002, and does not exist any more since the 1st January 2003. It was considered that this tax was harmful for employment, since more the company employed more it paid TP.

Today, the only base of the TP is the rental value of the tangible fixed assets available to the debtor. However, for certain professions (liberal in particular), one will retain the rental value of the only buildings and a percentage of the receipts (6%).

The calculation of the rental value of the tangible fixed assets

There are the fixed assets which are liable to the Real estate tax: the base of the TP will be then the land rental value, i.e. the cadastral Rental value not revalorized, the professional owner of his buildings of activity will be subjected at the same time to the real estate tax and the TP. For the tangible fixed assets which are not subjected to real estate tax (computers, machines, etc), one will retain 16% of the purchase price of the good or the rent if they are rented.

The calculation of the TP

The TP is established in each commune where the company has of buildings or grounds. It is a tax calculated at the communal level by the Center of the taxes, i.e. tax authorities of the State; a company established on several communes will have as many Avis of imposition to the title of the TP that communes in which it is established.

The tax is established according to the situation of the company at January 1st. The tax is established by commune by multiplying the taxable amount by the Tax rates of different the profit territorial collectivities since the tax benefits the communes, departments, areas and EPCI. On each opinion of imposition the shares for each territorial collectivity will be indicated.

The policy of the government since the TP exists was to modify it. The TP is a direct load for the companies and those always required so that this tax be reduced. Various measurements were taken with the wire time to reduce in a targeted way the fiscal charge of certain companies: new companies, widening of the wage base, haulage company…

Two rules have course in terms of TP: all the companies which have a Turnover higher than 7.600.000 €, are indebted of a minimal contribution which amounts to 1,5% of the added-value produced (that is to say sales minus the purchases and consumption external) by the company. There are a minimal contribution, but also a levelling off with contribution TP according to the produced Added-value. This levelling off is dealt with by the State in the form of reduction, so that it does not modify the products perceived by the territorial collectivities. Article 85 of the finance law for 2006 however introduced a major modification by leaving with the load of the local government agencies the part of the reduction corresponding to the evolution of the rates compared to a reference rate (rate 2004 + average increase in the rates between 2004 and 2005 per category of communities).

The tax product for the territorial collectivities

Exemptions

The territorial collectivities can make decisions of Exonération of TP. These decisions are made by a deliberation express of the deliberative Council and aim at exonerating certain activities. The community cannot make the decision to exonerate only one company; this decision must relate to a Branch of industry. Thus, certain artistic activities and intellectual (theater, cinema, etc) can be exonerated, as well as the seasonal furnished hirings, the doctors and medical auxiliaries at the beginning of installation (to attract these professions in rural environment), the companies which take again establishments in difficulty. Can be also exonerated the installations of companies in certain zones of the territory, a framework envisaged by the law. For the zones more in difficulty as well in term of rural enclavement as of social problems (free urban zones, zones of urban relaunching, zones of rural revitalization), the exemption automatically plays, except contrary deliberations of the communities, very rare in practice because they perceive compensations on behalf of the State. For the other zones (disadvantaged urban areas, zones of town and country planning), the exemption applies only if the community took a deliberation.

Rates

Then, the territorial collectivities must vote the rates of TP. The process for the vote of the rates, as the Tax of dwelling and the Real estate tax: the tax services notify with the territorial collectivities the total of the bases of the professional taxes. From there, the territorial collectivities vote the rate. The base multiplied by the rate gives the amount of the TP. The vote of the rates is framed. For each type of community, the rate cannot twice exceed the national average of the rates of the previous year. In addition, inside the community, the variation of the rate of TP is reached a maximum with once and half the variation of the rate of the Taxe of dwelling and the Real estate tax. The community votes initially the rates of the “taxes households”, which it can increase, but the rate of TP can be increased only of 1,5 times the increase in the rate of the taxes households (for example if the rate of the tax of dwelling and real estate tax increases by 10%, the TP can increase only by 15%).

The TPU

There exists since the law of July 12th 1999 the single Professional tax (TPU). This TPU exists obligatorily for the communities of agglomerations and on option for the communities of communes. It replaces the TP of common the members of EPCI.

Thus, in the community of agglomeration of Large Toulouse, there is one rate of TP, and the town of Toulouse lost this product with the profit of the inter-commune grouping. The TPU accounts for about 40% of the communal TP at the national level, the Intercommunalité substituent more and more with the communes and more and more, the communal TP is established at the inter-commune level in TPU. The communes transfer from competences to the communities of agglomerations, and thus lose loads.

So that the communes are not penalized too strongly and to avoid an enrichment of the EPCI, the communities of agglomeration or the common communities to TPU transfer a contribution of compensation (line 732) equal to the difference between amount of the TP which the commune perceived before and the amount of the loads that the communes transferred to the communities from agglomerations or the communities from common to TPU. To note that since 1984 the Trade unions of new Agglomeration have a TPU; it is even starting from this experiment undertaken in the new Cities that the law on the intercommunalities was built (source: Code general Territorial collectivities).

There exists moreover a kind of partial TPU: it is the mode of the professional tax of zone. In this configuration, a single rate of TP applies to the territory of a zone of economic activities. This tax mode is of an interest when a zone of activities is established on the territory of several communes. On the remainder of the territory of the EPCI, each commune its rate of TP determines freely and the product perceives some directly. This option is opened at the communities of communes.

Compensations poured by the State

When the legislator decided exemptions of TP for economic motives and social, the loss of revenue from taxes of the territorial collectivities is compensated by the State, because there are exemptions decided at the national level. Today, the compensations poured by the State with the territorial collectivities (line 7321) under the exemptions represent more than 30% of all the TP: the first contributor with the title of the TP is thus the State.

The decisions involving compensation by the State are: the free urban zones; the zones of rural revitalization; the general Abatement of 16% of the bases (decision taken in 1987: the State had decided to reduce by 16% the bases of all the companies); progressive abolition of the Share wages in the base of the TP (this last compensation being molten since 2004 in the total equipment of operation)…

Nevertheless, the compensations poured by the State are versed according to the situation of the companies at the time when the decision of exemption is made. For the progressive abolition of the share wages, the State compensates for the loss of tax product according to the companies existing at January 1st 1999, i.e. for the companies created afterwards, there is no compensation. However, these compensations are not limited in time; the communes are thus likely to benefit from it AD vitam æternam (line 74834).

The reform project of the professional tax, announced in January 2004 and which gave place to the " Report/ratio Fouquet " , was concretized by article 85 of the finance law for 2006, which supplements the mechanism of levelling off according to the Added-value and perennializes the reduction under the new investments.

The reform 2007 of the TP

This tax which is the subject of many criticisms is the object for 2007 of a reform relating to the methods of the levelling off of the contributions according to the Added-value. The system of old levelling off into force until 2006 is regarded as misfit in what it " surimposerait" certain companies.

Principles of this reform

a wide levelling off.

Previously, the calculation of the levelling off referred to rate TP of 1995. From now on, it will be the rate of 1995 or 1994. It is awaited kind which 150000 companies see revaluing the amount of their reduction.

a participation of the Territorial collectivities.

They will take part in the load of the reduction according to the rise of the rate of TP which they will have voted.

In the event of rise, a taking away will be carried out on their revenues from taxes of the year, a regularization being able to intervene two years later, according to the indeed marked reductions.

The taking away can be the allowance object according to methods which differ according to the types of communities and the tax mode that they apply.

The implementation

At the end of 2006: startup of a tool for simulation,

At the beginning of 2007: notification of the taxable amounts concerned with the territorial collectivities,

July in September 2007: notification of the possible taking away to the territorial collectivities,

2008: presentation by the companies of the requests for reduction,

At the beginning of 2009: possible transfer with the community.

See too

Local finances in France
Tax of dwelling
Real estate tax
departmental Funds of equalization of the professional tax

Notes & References

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