Lawyer specializing in tax law

Tax optimization is a divisive topic for many taxpayers. While it serves as a valuable tool for some companies, it is unfortunately often equated with tax fraud by a portion of the population.

What is corporate tax optimization?

Corporate tax optimization involves reducing the tax burden on a company. Thus, tax optimization can be defined as using tax rules in the most efficient way to reduce the tax burden. It is by no means tax fraud, which implies a willingness to operate outside the legal framework to minimize taxes.

Today, corporate taxation is highly complex, covering various types of taxes: corporate taxes, value-added taxes, business property taxes, etc. Therefore, mastering taxation has become a priority for business leaders.

Many business leaders today struggle to master their taxation due to the complexity of the laws and lack of time. However, the French tax system has established many mechanisms for companies to reduce their tax burden. Often, business leaders believe that tax optimization only concerns large international groups. In reality, it is relevant to all companies, regardless of their size. Indeed, SMEs are also affected by taxation, and it is necessary to master it.

Corporate Tax Optimization and Legality?

Contrary to popular belief, tax optimization does not mean illegality. Indeed, optimization involves using all applicable tax rules to reduce the tax burden. It is not forbidden for a company to want to reduce its taxation as long as it stays within the limits set by the law.

Tax optimization, therefore, requires a perfect understanding of the laws and the French tax system to avoid falling into tax fraud or having the optimization scheme challenged by the tax authorities.

How to optimize corporate taxation?

There are various mechanisms for optimizing corporate taxation. The prerequisite for any search for optimization solutions is a precise audit of the company’s current taxation. Next is the analysis of various options available to the company: setting up a group scheme to limit taxation on profit repatriation, managing deficits, using credits and tax reductions applicable to companies (research tax credits, sponsorship expenses, etc.).

It is essential to keep in mind that there is no optimization scheme applicable to all companies. Tax optimization requires a meticulous application of the rules based on the specific situation of the company.

Different Mechanisms for Corporate Tax Optimization

• Mastering Expenses and Deficits

Deductibility of current expenses is the easiest lever for a business leader to implement to optimize the taxation of their company. Although entrepreneurs understand the principle of deducting expenses, they may not necessarily deduct all of these expenses. It is necessary to pay attention to the conditions for deducting expenses from a tax perspective, especially that they must be incurred in the interest of the company and justified by an invoice.

In addition to the deductibility of expenses, a company can reduce its tax burden through effective management of its deficits. Of course, deficits can be used to offset taxable profits in subsequent years, but it is also possible to carry back this deficit to a previous profit and thus benefit from a “carry-back” claim to the treasury. However, the offsetting of deficits, whether carried forward or backward, is subject to various conditions.

• Use of Group Schemes

There are two tax regimes for groups of companies.

The first is the Parent/Subsidiary regime. Through this mechanism, dividends repatriated to the parent company will be exempt from taxes, subject to the reintegration of a 5% share, which will be subject to corporate tax.

The main conditions of this regime are the participation threshold of the parent company in its subsidiary, which must be at least 5%, and the obligation to retain the shares for at least 2 years.

The second mechanism is that of tax consolidation. The group will be subject to joint taxation at the level of the group’s head, allowing, in particular, for compensation between the profitable and deficit results of the group’s various companies. Finally, intragroup capital gains will be neutralized.

This mechanism is also subject to several conditions: ownership of 95% of the capital of subsidiaries by the group’s head, closing of financial years on the same dates, drafting of a tax consolidation agreement.

The establishment of tax consolidation should not be taken lightly. Indeed, although this regime offers many tax advantages, it implies additional declarative obligations.

• Use of Various Tax Credits and Reductions

Tax credits and reductions are mechanisms put in place by the legislator to encourage companies to invest in certain sectors or territories.

There are different tax credits and reductions for companies.

The most well-known is undoubtedly the Research Tax Credit (CIR). It was introduced to promote the research and development (R&D) activities of French companies. The amount of the tax credit varies depending on the amount of investments made by the company: 30% or 5% depending on whether the investment amount exceeds 100,000,000 euros.

In addition, there are specific mechanisms to promote overseas investment.

Thus, a company subject to corporate tax will be able to fully deduct certain investments made in overseas territories. This mechanism provided for in Article 217 undecies of the CGI concerns in particular productive investments and the construction or acquisition of buildings for rental use. However, the benefit of this scheme is subject to stringent conditions.

There are many mechanisms available to a company to optimize its taxation. The assistance of a tax lawyer is recommended to choose the devices adapted to the situation of your company. Beyond the choice of the mechanism, a tax lawyer will accompany you in the implementation of it, which can sometimes be complex due to the numerous conditions provided by the legislator.

Risks of Corporate Tax Optimization?

Attention, the practice of tax optimization is not without risks. The major risk is to fall into illegality by trying to circumvent tax rules. Such illegality can be sanctioned on the grounds of tax fraud.

In addition, the French tax administration has an increasingly extensive arsenal for repressing abuse of tax law, allowing it to set aside certain tax optimization schemes. For all these reasons, it is necessary to be accompanied by a tax lawyer to optimize your company’s taxation safely.

Why Hire a Tax Lawyer?

Many professionals offer their assistance in implementing tax optimization solutions: lawyers, notaries, accountants, wealth management advisors.

Among all these professionals, only a tax lawyer can engage in tax law consulting. They have a solid legal background and in-depth knowledge of tax legislation necessary for the practice of corporate tax optimization. Furthermore, through litigation practice, a tax lawyer will advise you to avoid the challenge of the chosen optimization scheme by the tax authorities.

Due to their experience and knowledge, tax lawyers at LEXPERTAX are experts in corporate tax optimization.

We will advise and accompany you in auditing your company’s taxation beforehand, determining the best optimization solutions to implement together, and finally securing the implementation of the chosen scheme.

The role of the lawyer specialized in tax law is to advise and assist companies and individuals in terms of tax advice in the context of all their operations with tax implications – acquisition, structuring, optimization, tax exemption, disposal, transmission – as well as in the context of their tax procedures and interactions with the tax authorities during tax audits and tax disputes.

A lawyer specialized in tax law is the only professional authorized to directly and exclusively engage in the activity of tax advice.

Hiring a lawyer specialized in tax law ensures the competence and expertise of an independent professional with a degree in tax law.

Taxation is now ubiquitous for both businesses and individuals.

A lawyer specialized in tax law is there to advise and assist you in all your operations and decisions with tax implications (acquisition, asset structuring, estate transmission, tax optimization operations, etc.).

It is recommended to always consult a lawyer specialized in tax law in advance of these operations to anticipate and optimize their tax consequences.

The lawyer specialized in tax law is the advisor in taxation for businesses and individuals. As such, the lawyer specialized in tax law is called upon to intervene on all tax matters: corporate taxation and company taxation, corporate tax, property tax, value-added tax, corporate tax optimization, group taxation, holding company taxation, wealth taxation, tax planning, wealth management, individual tax optimization, real estate taxation, international taxation.

The tax lawyer deals with tax advice and tax strategy, tax information, tax inquiries, tax consultation, tax declaration, tax audit, tax litigation, and procedures with the Tax Administration.