French Business Taxation Practice Quiz (62 questions)

All questions and answers

1. What distinguishes a single-member company from a multi-member company?

A single-member company has one member, while a multi-member company has several.
A single-member company has one manager, while a multi-member company has several.
A single-member company has one share class, while a multi-member company has several.
A single-member company has one creditor, while a multi-member company has several.

A single-member company has one member, while a multi-member company has several.

Explanation

The distinction is based on the number of members: one in a single-member company and several in a multi-member company. The number of managers does not define this distinction.

2. A company member contributes €20,000, and the company later cannot pay its debts. What does limited liability generally mean for that member?

The member must pay company debts from personal assets before company assets are used.
The member’s liability for company debts is limited to the member’s contribution.
The member must cover company debts up to the company’s total outstanding amount.
The member’s liability depends on how many other members remain in the company.

The member’s liability for company debts is limited to the member’s contribution.

Explanation

In a limited-liability company, members’ liability for company debts is limited to their contributions. The contrasting unlimited-liability form can expose members to debts without that limit.

3. Which characteristic is most important in distinguishing a partnership from a capital company?

A partnership emphasizes the members’ personal characteristics, while a capital company emphasizes the capital invested.
A partnership emphasizes the amount of capital, while a capital company emphasizes each member’s personal identity.
A partnership emphasizes the company’s tax rate, while a capital company emphasizes its number of employees.
A partnership emphasizes the company’s location, while a capital company emphasizes its business activity.

A partnership emphasizes the members’ personal characteristics, while a capital company emphasizes the capital invested.

Explanation

A partnership is characterized by the importance of its members’ identities, or intuitu personae, whereas capital predominates in a capital company. The second choice reverses that distinction.

4. An SME has turnover below €10 million, fully paid-up capital, and at least 75% of its capital held by individuals or non-parent companies. How may the reduced corporate tax rate apply?

A 15% rate may apply to all profit, while the normal rate is 25% on the first €42,500.
A 25% rate may apply to the first €42,500 of profit, while the normal rate is 15%.
A 15% rate may apply to the first €42,500 of turnover, while the normal rate is 25%.
A 15% rate may apply to the first €42,500 of profit, while the normal rate is 25%.

A 15% rate may apply to the first €42,500 of profit, while the normal rate is 25%.

Explanation

Eligible SMEs may receive a 15% rate on the first €42,500 of profit; the normal corporate tax rate is 25%. The reduced rate applies to a portion of profit, not to all profit or to turnover.

5. Which profits fall within the definition of BIC?

Profits made by individuals receiving wages, pensions, or investment income.
Profits made by associations carrying on charitable, cultural, or educational activities.
Profits made by companies carrying on financial, agricultural, or professional activities.
Profits made by individuals carrying on commercial, craft, or industrial activities.

Profits made by individuals carrying on commercial, craft, or industrial activities.

Explanation

BIC are profits made by individuals who carry on a commercial, craft, or industrial activity. Wage and investment income do not fall within that definition.

6. A commercial activity is not expressly listed in a specific statutory category, but is connected to another commercial activity. On what basis might it still be taxable as BIC?

It may be taxable as professional income because it is linked to another activity.
It may be taxable by attraction to the commercial activity.
It may be taxable as BIC only if it is independently classified as industrial.
It may be taxable as property income because it lacks a specific statutory designation.

It may be taxable by attraction to the commercial activity.

Explanation

Commercial activity may be taxable as BIC by its nature, by statutory designation, or by attraction to a commercial activity. A connection to a commercial activity can therefore bring it within BIC by attraction.

7. How are unfurnished and furnished property rentals generally classified for tax purposes?

Unfurnished rentals are property income, while furnished rentals are commercial activity taxed as BIC.
Unfurnished rentals are commercial activity taxed as BIC, while furnished rentals are property income.
Both types are property income, but furnished rentals receive a different deduction.
Both types are commercial activity taxed as BIC, but unfurnished rentals use a separate rate.

Unfurnished rentals are property income, while furnished rentals are commercial activity taxed as BIC.

Explanation

Unfurnished rentals are taxed as property income, whereas furnished rentals are treated as commercial activity and taxed as BIC under Article 35 of the CGI. The second choice reverses the two classifications.

8. A person has a home in France but carries on their main professional activity and holds their center of economic interests abroad. What does the stated French tax-residence rule indicate?

The person is domiciled in France only if their principal professional activity is there.
The person is domiciled in France because having a home there meets one criterion.
The person is not domiciled in France unless their center of economic interests is there.
The person is not domiciled in France unless all three criteria are met.

The person is domiciled in France because having a home there meets one criterion.

Explanation

Under Article 4 B of the CGI, meeting at least one stated criterion is sufficient, and having a home in France is one such criterion. The rule does not require all three criteria to be met.

9. What is the taxable base?

The amount to which tax rates are applied after deductible charges are accounted for.
The amount of tax remaining after reductions and credits have been applied.
The amount of deductible charges recorded during the tax period.
The total receipts collected before business expenses are taken into account.

The amount to which tax rates are applied after deductible charges are accounted for.

Explanation

The taxable base is the amount on which tax rates are applied after accounting for deductible charges. It is not the tax due after credits or reductions.

10. A business records a well-documented expense that reduces net assets but was incurred for the owner’s personal benefit rather than the business. Does it meet the stated conditions for deductibility?

No, because a charge must increase net assets and support the business’s normal management.
No, because a deductible charge must also be incurred in the business’s interest as part of normal management.
Yes, because reducing net assets and having supporting records are sufficient for deductibility.
Yes, because a business expense is deductible whenever it is regularly recorded.

No, because a deductible charge must also be incurred in the business’s interest as part of normal management.

Explanation

A deductible charge must reduce net assets, serve the business’s interest as part of normal management, and be regularly recorded with supporting documentation. A personal expense fails the business-interest condition even if documented.

11. A business buys equipment intended to remain in use for several years. How should the cost generally be treated in distinguishing a charge from an asset?

The asset is depreciated over its expected useful life rather than deducted all at once as an immediate charge.
The asset is deducted only when it is sold because it remains in the business.
The asset is recorded as a charge each year at the same amount regardless of useful life.
The asset is treated as an immediate charge because its cost reduces the current result.

The asset is depreciated over its expected useful life rather than deducted all at once as an immediate charge.

Explanation

An asset intended to remain in the business is depreciated over its expected useful life, while an immediate charge reduces the current result. Treating the equipment as an immediate charge confuses these categories.

12. A taxpayer’s tax due is lower than the amount of an available tax credit. What may happen to the unused amount, unlike an unused tax reduction?

The tax credit may lower tax due below zero without a refund.
The tax credit may result in a refund from the tax administration.
The tax credit may be converted into a tax reduction that creates a refund.
The tax credit may be applied only to the current tax due and cannot be refunded.

The tax credit may result in a refund from the tax administration.

Explanation

A tax credit may lead to a refund when it exceeds the tax due, whereas a tax reduction cannot lower tax below zero. A tax reduction does not create a refundable negative tax balance.

13. How can a provision affect the calculation of a company’s taxable profit?

It records an expected increase in asset value and is added to taxable profit as future revenue.
It records a cash payment made by owners and reduces taxable profit regardless of its business purpose.
It records a probable risk, charge, impairment, or operating loss and may be deducted in determining taxable profit.
It records a tax payment already assessed and replaces the calculation of the company’s taxable profit.

It records a probable risk, charge, impairment, or operating loss and may be deducted in determining taxable profit.

Explanation

A provision recognizes a probable risk, charge, asset impairment, or operating loss and may be deducted when taxable profit is determined. A provision is not a record of an expected asset-value increase or future revenue.

14. A qualifying new business begins a new activity and establishes itself in an area specified by Article 44 sexies of the French General Tax Code; what relief does this provision offer?

A one-year exemption on profits, followed by a fixed tax credit for later years.
A permanent exemption on profits, provided the business operates in any French region.
A five-year exemption on profits, subject to the provision’s conditions.
A five-year reduction in tax on all profits, regardless of the activity or location.

A five-year exemption on profits, subject to the provision’s conditions.

Explanation

Article 44 sexies provides qualifying new businesses with a five-year exemption on profits, subject to conditions such as a new activity and establishment in a specified area. The exemption is not permanent or available without satisfying the activity and location conditions.

15. A taxpayer’s tax due is smaller than a potential tax benefit; which distinction determines whether the unused amount can generate a refund?

Neither a tax reduction nor a tax credit can lower tax due below its original amount.
A tax reduction can lower tax due to zero, while a tax credit can exceed it and produce a refund.
Both a tax reduction and a tax credit can exceed tax due and produce a refund.
A tax reduction can produce a refund, while a tax credit can lower tax due only to zero.

A tax reduction can lower tax due to zero, while a tax credit can exceed it and produce a refund.

Explanation

A tax reduction lowers the amount due but cannot create a negative tax balance, whereas a tax credit can exceed the tax due and produce a refund. The reverse treatment of reductions and credits confuses the two mechanisms.

16. A company incurs research expenditure within the annual ceiling; what research tax credit rate and expenditure limit are described?

50% of research expenditure, up to €77 million per year.
12.8% of research expenditure, up to €100 million per year.
30% of research expenditure, up to €15 million per year.
30% of research expenditure, up to €100 million per year.

30% of research expenditure, up to €100 million per year.

Explanation

The research tax credit is described as 30% of research expenditure, with a maximum of €100 million per year. The 50% rate and €77 million figure belong to a different tax context, not this credit.

17. A landlord rents one apartment furnished and another unfurnished; how are the two rental incomes classified?

Both rental incomes are classified as property income because the landlord owns the apartments.
Both rental incomes are classified as BIC because they arise from letting property.
The furnished rental income is property income, while the unfurnished rental income is BIC.
The furnished rental income is BIC, while the unfurnished rental income is property income.

The furnished rental income is BIC, while the unfurnished rental income is property income.

Explanation

Furnished rental income is classified as business and commercial profits (BIC), while unfurnished rental income is classified as property income. The classification depends on whether the accommodation is furnished, not simply on property ownership.

18. An owner receives €12,000 in annual income from an unfurnished rental and uses the micro property-income regime; what allowance applies?

A 30% allowance applies under the real regime for income above €15,000.
A 50% allowance applies under the micro regime for income below €15,000.
A 30% allowance applies under the micro regime for income below €15,000.
Eligible rental expenses are deducted under the micro regime, with no fixed allowance.

A 30% allowance applies under the micro regime for income below €15,000.

Explanation

The micro property-income regime applies below €15,000 in annual income and provides a 30% allowance. Deduction of eligible rental expenses instead characterizes the real regime.

19. A taxpayer with furnished rental income below €77,000 chooses the micro-BIC regime; what treatment is described for that regime?

A 50% allowance applies; under the real BIC regime, eligible expenses and property depreciation may be deducted.
A 50% allowance applies; under the real BIC regime, rental receipts are taxed without expense deductions.
A 12.8% allowance applies; under the real BIC regime, property depreciation is treated as rental income.
A 30% allowance applies; under the real BIC regime, eligible expenses and property depreciation may be deducted.

A 50% allowance applies; under the real BIC regime, eligible expenses and property depreciation may be deducted.

Explanation

For furnished rentals, the micro-BIC threshold is €77,000 and the allowance is 50%; the real regime permits eligible expenses and property depreciation to be deducted. The 30% allowance applies to the micro property-income regime, not micro-BIC.

20. An owner sells an unfurnished rental property, while another taxpayer sells a property used for furnished BIC rentals; how may the gains be treated?

The unfurnished rental gain may follow private or professional rules based on status; the furnished BIC gain is treated as a private individual’s capital gain.
Both gains are treated as private individual capital gains, regardless of the taxpayer’s status or rental activity.
The unfurnished rental gain is treated as a private individual’s capital gain; the furnished BIC gain may follow private or professional rules based on status.
Both gains are treated as professional gains because each property generated rental income.

The unfurnished rental gain is treated as a private individual’s capital gain; the furnished BIC gain may follow private or professional rules based on status.

Explanation

The sale gain for an unfurnished rental is described as a private individual’s capital gain, while a furnished BIC rental gain may fall under private or professional rules depending on the taxpayer’s status. Treating both gains as private disregards that status-dependent distinction for furnished BIC rentals.

21. A taxpayer has a nonprofessional BIC deficit and positive income from other sources; how does the described nonprofessional regime treat that deficit?

It cannot be offset against overall income, and depreciation and overall-income deficit offsetting are unavailable under that regime.
It cannot be offset against overall income, but depreciation remains available under that regime.
It can be offset against overall income when the taxpayer also reports professional BIC.
It can be offset against overall income, but depreciation is unavailable under that regime.

It cannot be offset against overall income, and depreciation and overall-income deficit offsetting are unavailable under that regime.

Explanation

Nonprofessional BIC deficits cannot be offset against overall income, and depreciation and overall-income deficit offsetting are unavailable under the described regime. The regime does not permit the deficit offset simply because the taxpayer has other income.

22. Which activity best fits the description of professional BIC?

A one-time private sale of household goods, alongside other activities unrelated to commerce.
Occasional unfurnished letting, alongside personal investments and private asset sales.
Passive ownership of securities, alongside interest income and noncommercial personal activities.
Habitual furnished letting, alongside activities such as industrial or commercial operations, property dealing, resale, and crafts.

Habitual furnished letting, alongside activities such as industrial or commercial operations, property dealing, resale, and crafts.

Explanation

Professional BIC includes income from habitual industrial or commercial activity and treated-as-commercial activities such as property dealing, professional or habitual furnished letting, buying for resale, and crafts. Occasional unfurnished letting is not one of the listed examples of professional BIC.

23. A business earns revenue in December but receives payment in January; under the described BIC calculation, which period includes the revenue?

The accounting period in which the invoice is paid, under cash accounting.
The accounting period in which the cash is received, under cash accounting.
The accounting period in which the annual tax return is filed, under accrual accounting.
The accounting period in which the revenue is generated, under accrual accounting.

The accounting period in which the revenue is generated, under accrual accounting.

Explanation

BIC is calculated using products and expenses generated during the accounting period under accrual accounting, so the December revenue belongs to that period. Cash accounting instead records receipts and payments when they occur.

24. A company has an accounting result of €80,000, non-taxable deductions of €10,000, and non-deductible add-backs of €5,000; what is its taxable result?

€85,000, calculated by subtracting both non-taxable deductions and non-deductible add-backs from the accounting result.
€95,000, calculated by adding non-taxable deductions and non-deductible add-backs to the accounting result.
€65,000, calculated by subtracting non-deductible add-backs from the accounting result after deductions.
€75,000, calculated as the accounting result minus non-taxable deductions plus non-deductible add-backs.

€75,000, calculated as the accounting result minus non-taxable deductions plus non-deductible add-backs.

Explanation

The taxable result is accounting result minus non-taxable deductions plus non-deductible add-backs, giving €80,000 − €10,000 + €5,000 = €75,000. Adding the deductions instead of subtracting them reverses their stated role in the calculation.

25. How does the micro-BIC regime determine taxable profit compared with a real regime?

Micro-BIC applies a flat allowance to receipts, while a real regime calculates profit from receipts and charges, with adjustments.
Both regimes apply a flat allowance to receipts, but the real regime uses a different allowance rate.
Micro-BIC taxes total receipts directly, while a real regime calculates profit from receipts without considering charges.
Micro-BIC deducts actual charges from receipts, while a real regime applies a flat allowance to total receipts.

Micro-BIC applies a flat allowance to receipts, while a real regime calculates profit from receipts and charges, with adjustments.

Explanation

Micro-BIC uses a flat allowance, whereas a real regime determines profit from receipts and charges, including required add-backs and deductions. The claim that micro-BIC deducts actual charges reverses the defining distinction between the regimes.

26. Which income is classified as a non-commercial benefit (BNC)?

Income from renting property held by an individual or a property company.
A partner’s share of profits from a company subject to corporate income tax.
Income from selling goods as part of a commercial business activity.
Income from a liberal profession that does not fall into another benefits or income category.

Income from a liberal profession that does not fall into another benefits or income category.

Explanation

BNC covers profits from liberal professions and other lucrative activities not classified in another benefits or income category. Income from selling goods in a commercial business is associated with a different category.

27. In a partnership taxed under personal income tax, how is the tax on business profits borne?

The partnership pays tax as a separate taxpayer before distributing profits.
Each partner is taxed directly on a share proportional to their participation.
Partners are taxed only when distributed profits exceed their initial contributions.
Each partner is taxed equally, regardless of their participation in the partnership.

Each partner is taxed directly on a share proportional to their participation.

Explanation

The partners directly bear tax on their respective shares of profit, allocated in proportion to their participation, because the partnership is not a separate taxpayer. Taxing the partnership itself as a distinct taxpayer contradicts this treatment.

28. An individual sells an asset held as part of their personal estate for more than its acquisition cost. What kind of gain is this?

A commercial benefit arising from the sale of inventory held for resale.
A private capital gain arising from the paid disposal of personal property.
A property-income gain arising from renting out a privately held asset.
A professional capital gain arising from income generated by a business.

A private capital gain arising from the paid disposal of personal property.

Explanation

A private capital gain is the profit an individual realizes when disposing of an element of their private estate for consideration. A gain tied to income generated by a business is professional rather than private.

29. A private asset was acquired for €80,000 and later sold for €105,000. What is the gross capital gain?

€25,000, calculated by subtracting acquisition price from sale price.
€105,000, because the gross gain equals the sale price.
€80,000, calculated by subtracting sale price from acquisition price.
€185,000, calculated by adding the sale and acquisition prices.

€25,000, calculated by subtracting acquisition price from sale price.

Explanation

Gross capital gain equals the sale price minus the acquisition price, giving €105,000 − €80,000 = €25,000. The acquisition price is a subtraction in the calculation, not the amount of the gain.

30. Under the stated treatment, what is the combined tax and social-levy rate on a net real-estate capital gain?

36.20%, combining 19% income tax and 17.2% social levies.
25%, combining 15% income tax and 10% social levies.
17.2%, with income tax added only after the social levies.
19%, combining income tax and social levies into one rate.

36.20%, combining 19% income tax and 17.2% social levies.

Explanation

The stated total is 36.20%, made up of 19% income tax plus 17.2% social levies. The 19% figure is the income-tax component, not the combined burden.

31. A landlord receives €12,000 in rental income. Which treatment applies under the stated threshold rule?

The landlord must calculate taxable income without an allowance or charge deductions.
The micro-foncier regime applies automatically with a 30% flat allowance.
The micro-foncier regime applies with a 34% flat allowance.
The real regime applies automatically and permits deduction of admissible actual charges.

The micro-foncier regime applies automatically with a 30% flat allowance.

Explanation

Because the rental income is below €15,000, the micro-foncier regime applies automatically and grants a 30% flat allowance. The real regime instead allows deduction of admissible actual charges and is not the automatic treatment described for this income level.

32. A company’s current-year deficit is applied to its preceding year’s profit. Which mechanism is being used?

Carry-back, which applies the deficit to the previous year’s profit.
Carry-back, which applies the deficit to profits in future years.
Carry-forward, which applies the deficit to the previous year’s profit.
Carry-forward, which applies the deficit to profits in future years.

Carry-back, which applies the deficit to the previous year’s profit.

Explanation

Carry-back applies a current deficit to the profit of the preceding financial year; corporate tax also permits deficits to be carried forward. Carry-forward concerns future profits, not the preceding year’s profit.

33. A company qualifies for the stated reduced corporate income-tax rate and has taxable profit of €40,000. Which rate applies within the stated limit?

15%, because the reduced rate applies only to profit above €42,500.
25%, because the normal rate applies to profit below the limit.
15%, because the profit falls within the €42,500 limit.
25%, because the reduced rate replaces the normal rate only above €42,500.

15%, because the profit falls within the €42,500 limit.

Explanation

The stated reduced rate is 15% on profits within the €42,500 limit, so it applies to €40,000 of taxable profit for a qualifying company. The 25% figure is the normal rate, not the reduced rate for profit within that threshold.

34. A property deficit is larger than €10,700. How may the deficit be used under the stated rules?

Up to €10,700 may offset other income, while the excess may offset profits for 10 years.
The entire deficit may offset profits, while the excess may offset other income for 10 years.
The entire deficit may offset other income, while the excess may offset profits for 10 years.
Up to €10,700 may offset profits, while the excess may offset other income for 10 years.

Up to €10,700 may offset other income, while the excess may offset profits for 10 years.

Explanation

The first €10,700 may be set against other income categories, but any excess is ring-fenced and may offset profits for 10 years. Treating the excess as available against other income reverses the stated distinction.

35. A taxpayer carries out eligible energy-renovation work from 1 January 2023 through 31 December 2025 on a property rated DPE F. What property-deficit deduction ceiling applies?

The ceiling is €21,400 for eligible work on a property rated DPE D or E during that period.
The ceiling is €21,400 for eligible work on a property rated DPE F or G during that period.
The ceiling is €21,400 for eligible work on a property rated DPE F or G outside that period.
The ceiling is €10,700 for eligible work on a property rated DPE F or G during that period.

The ceiling is €21,400 for eligible work on a property rated DPE F or G during that period.

Explanation

Eligible energy-renovation work on a property rated DPE F or G receives a doubled ceiling of €21,400 when carried out within the specified dates. The €10,700 amount is the normal ceiling, not the increased ceiling for qualifying work.

36. How are dividends received by an individual classified and taxed under the stated flat-tax treatment?

As business income, taxed at 25%.
As income from movable capital, taxed at 30%.
As property income, taxed at 30%.
As capital gains, taxed at 25%.

As income from movable capital, taxed at 30%.

Explanation

Dividends received by an individual are classified as income from movable capital and taxed at 30% under the described flat tax. Classifying them as property income confuses dividends with income derived from property.

37. What tax base is used for corporate income tax under the stated rule, subject to specific corporate-tax rules?

The capital-gains tax base, with specific rules potentially modifying its application.
The property-income tax base, with specific rules potentially modifying its application.
The BIC tax base, with specific rules potentially modifying its application.
The RCM tax base, with specific rules potentially modifying its application.

The BIC tax base, with specific rules potentially modifying its application.

Explanation

The stated rule uses the BIC tax base for corporate income tax, subject to specific rules, as cited under Article 209 of the CGI. The RCM base concerns movable-capital income rather than the described basis for corporate income tax.

38. A company has a tax deficit and wants either to use it against future profits or against the preceding year's profit. Which description correctly distinguishes these choices?

Carry-forward offsets later profits and creates a claim against the Treasury; carry-back offsets the preceding year's profit.
Carry-forward offsets the current year's profit; carry-back offsets later profits and creates a claim against the Treasury.
Carry-forward offsets the preceding year's profit; carry-back offsets later profits and creates a claim against the Treasury.
Carry-forward offsets later profits; carry-back offsets the preceding year's profit and creates a claim against the Treasury.

Carry-forward offsets later profits; carry-back offsets the preceding year's profit and creates a claim against the Treasury.

Explanation

Carry-forward applies the deficit against profits in later years, whereas carry-back applies it against the preceding financial year's profit and creates a claim against the Treasury. The alternative that assigns the Treasury claim to carry-forward misplaces the stated consequence of carry-back.

39. Which rule governs the amount and duration of a corporate tax deficit carried forward?

It may be carried forward without a time limit, subject each year to a deduction cap of €1 million plus 50% of the excess above €1 million.
It may be carried forward without a time limit, subject each year to a deduction cap of €1 million plus 25% of the excess above €1 million.
It may be carried forward without a time limit, subject each year to a deduction cap of €1 million plus 50% of the deficit below €1 million.
It may be carried forward for 10 years, subject each year to a deduction cap of €1 million plus 50% of the excess above €1 million.

It may be carried forward without a time limit, subject each year to a deduction cap of €1 million plus 50% of the excess above €1 million.

Explanation

Carry-forward has no time limit, but the deductible amount in a year is capped at €1 million plus 50% of the amount exceeding €1 million. The 10-year period applies to a different deficit rule, not to corporate tax carry-forward.

40. A company subject to corporate income tax holds 6% of another company and receives dividends from it. How does the parent-subsidiary regime treat those dividends?

They are exempt from corporate income tax except for a 5% add-back for capital gains.
They are exempt from corporate income tax except for a 10% add-back for expenses and charges.
They are exempt from corporate income tax, with the add-back applying when the parent holds less than 5%.
They are exempt from corporate income tax except for a 5% add-back for expenses and charges.

They are exempt from corporate income tax except for a 5% add-back for expenses and charges.

Explanation

A parent subject to corporate income tax meets the stated threshold with a 6% holding, and the dividends are exempt except for a 5% add-back for expenses and charges. The 5% threshold concerns eligibility for the regime, not the rate of the add-back.

41. Under the stated example, what tax is due on €8 million of dividends through the parent-subsidiary regime, and what saving is estimated compared with taxation of the full amount at 30%?

The 5% taxable share is €400,000, producing €100,000 of tax at 30% and an estimated saving of about €2.3 million.
The 5% taxable share is €400,000, producing €400,000 of tax at 25% and an estimated saving of about €2.3 million.
The 5% taxable share is €400,000, producing €100,000 of tax at 25% and an estimated saving of about €2.3 million.
The 5% taxable share is €400,000, producing €100,000 of tax at 25% and an estimated saving of about €2.4 million.

The 5% taxable share is €400,000, producing €100,000 of tax at 25% and an estimated saving of about €2.3 million.

Explanation

Five percent of €8 million is €400,000, and applying 25% corporate tax gives €100,000; compared with €2.4 million at 30% on the full amount, the estimated saving is about €2.3 million. Applying 30% to the taxable share confuses the comparison rate with the corporate tax rate used on the add-back.

42. An individual contributes shares in a SASU to a newly created holding. How may Article 150-0 B ter treat the resulting capital gain?

Taxation may be deferred, with the gain becoming due upon a later sale of the holding shares, subject to conditions.
The gain is transferred to the holding and taxed only when the SASU sells its assets.
The gain is exempt from tax as long as the holding retains the contributed shares.
The gain is taxed immediately at the time of contribution, with no deferral available.

Taxation may be deferred, with the gain becoming due upon a later sale of the holding shares, subject to conditions.

Explanation

The contribution is treated as a transfer, but it can benefit from deferred taxation subject to conditions, with the gain becoming due upon a subsequent sale of the holding shares. Immediate taxation overlooks the deferral mechanism provided for under this rule.

43. A parent company owns at least 5% of a subsidiary and receives dividends under the parent-subsidiary regime. What does the 5% figure represent?

The proportion of the parent's shares that is exempt from taxation on a later sale.
The proportion of intercompany dividends treated as a taxable deemed expense-and-charge share.
The minimum proportion of dividends that the subsidiary must distribute each year.
The tax rate imposed on the entire amount of intercompany dividends received.

The proportion of intercompany dividends treated as a taxable deemed expense-and-charge share.

Explanation

Under the regime, 5% of the intercompany dividends are taxable as a deemed expense-and-charge share. The figure is not a 5% tax rate applied to all the dividends.

44. A homeowner wants to preserve the principal-residence capital-gains exemption while holding the home through an SCI. Which structure can qualify?

An SCI subject to income tax, while an SCI subject to corporate tax does not qualify.
Neither type of SCI, because the exemption requires direct individual ownership.
An SCI subject to corporate tax, while an SCI subject to income tax does not qualify.
Either type of SCI, provided the homeowner occupies the property at the time of sale.

An SCI subject to income tax, while an SCI subject to corporate tax does not qualify.

Explanation

The residence may be held through an income-tax SCI and still qualify for the principal-residence exemption. An SCI subject to corporate tax does not qualify for that exemption.

45. A person has usufruct over a rented property but is not its owner. Which rights does the usufruct provide?

The right to receive the property's income, but not to use or sell it.
The right to sell the property as owner and receive its income, but not to use it.
The right to use the property and receive its income, but not to sell it as owner.
The right to use the property and sell it, but not to receive its rental income.

The right to use the property and receive its income, but not to sell it as owner.

Explanation

Usufruct grants the right to use an asset and receive its income, such as rent, without granting the right to sell it as owner. The right to sell belongs to the bare owner, not the usufructuary.

46. A transaction is legally real but has no purpose other than avoiding tax. Which form of abuse of rights does this describe?

Simulation, because the legal arrangement does not reflect the parties' actual conduct.
Abnormal management, because the transaction necessarily impoverishes the company.
A routine tax adjustment, because the arrangement has a genuine non-tax purpose.
Fraud on the law, because the arrangement is real but serves no purpose beyond tax avoidance.

Fraud on the law, because the arrangement is real but serves no purpose beyond tax avoidance.

Explanation

Fraud on the law concerns a real arrangement whose sole purpose is tax avoidance. Simulation instead involves a legal arrangement that does not reflect reality.

47. When abuse of rights is established, which consequence is listed for a taxpayer acting in good faith?

Recovery of evaded taxes, monthly late-payment interest, and a surcharge reduced to 40% of reassessed duties.
Cancellation of the reassessment, with monthly interest and an 80% surcharge on the original duties.
Recovery of evaded taxes, annual late-payment interest, and a surcharge reduced to 20% of reassessed duties.
Recovery of evaded taxes and a 40% surcharge, with late-payment interest waived in good-faith cases.

Recovery of evaded taxes, monthly late-payment interest, and a surcharge reduced to 40% of reassessed duties.

Explanation

The listed consequences include recovery of evaded taxes, interest of 0.20% per month, and a surcharge reduced to 40% of reassessed duties in cases of good faith. Good faith reduces the surcharge but does not waive the late-payment interest.

48. A company gives up income through a decision that lacks a valid economic justification. How may the tax administration treat the resulting loss?

As simulation, disregarding the decision because it does not reflect the company's conduct.
As normal management, deducting the foregone income from the company's taxable result.
As abnormal management, adding the foregone income back to the company's taxable result.
As a capital loss, offsetting it against the shareholders' personal taxable income.

As abnormal management, adding the foregone income back to the company's taxable result.

Explanation

An unjustified decision that impoverishes a company may constitute abnormal management, allowing the administration to add the resulting foregone income back to taxable results. A valid economic justification would mean the decision is not abnormal on this basis.

49. A principal residence is held through an SCI subject to corporate tax. How is a capital gain on its sale treated under the principal-residence rules?

The gain is taxed without the principal-residence exemption or holding-period allowances.
The gain is fully exempt if the associates occupied the residence before its sale.
The gain is exempt after the SCI has held the residence for a sufficient period.
The gain receives a proportional principal-residence exemption based on each associate's share.

The gain is taxed without the principal-residence exemption or holding-period allowances.

Explanation

An SCI subject to corporate tax pays tax on the gain without the principal-residence exemption or holding-period allowances. Proportional exemption based on an associate's share can apply to an income-tax SCI, not a corporate-tax SCI.

50. What is the central effect of French corporate tax consolidation for an eligible group?

It allows member companies' taxable profits and deficits to be offset at the parent level.
It transfers all subsidiaries' assets and liabilities to the parent for tax purposes.
It exempts each subsidiary's profits from corporate tax while the parent remains taxable.
It allows each subsidiary to offset its taxable results against the parent's prior-year profits.

It allows member companies' taxable profits and deficits to be offset at the parent level.

Explanation

Tax consolidation allows an eligible group to offset member companies' taxable profits and deficits at the parent level. It does not exempt subsidiaries' profits; the group's combined result is taxed through the parent.

51. Which ownership threshold must the parent meet for a subsidiary to join the tax-consolidation perimeter?

The parent must hold at least 50% of the subsidiary, and the parent must be subject to corporate tax.
The parent must hold at least 95% of the subsidiary, and the companies must be subject to corporate tax.
The parent must hold at least 75% of the subsidiary, and the companies must be subject to corporate tax.
The parent must hold at least 95% of the subsidiary, and the companies must be subject to income tax.

The parent must hold at least 95% of the subsidiary, and the companies must be subject to corporate tax.

Explanation

The companies must be subject to corporate tax, and the parent must hold at least 95% of each subsidiary. A lower ownership threshold does not meet the stated perimeter requirement.

52. In which order does tax consolidation combine a group's results and determine who pays tax?

Each subsidiary pays tax on its result, the parent offsets the payments, and subsidiaries carry the combined result forward.
The parent estimates each subsidiary's result, each subsidiary combines the group's results, and the parent pays tax separately.
The parent calculates its own result, subsidiaries offset it with their deficits, and each subsidiary pays tax on the balance.
Each subsidiary calculates its result, the results are combined at the parent, and the parent pays tax on the combined result.

Each subsidiary calculates its result, the results are combined at the parent, and the parent pays tax on the combined result.

Explanation

The process begins with each subsidiary calculating its taxable profit or deficit, followed by combining those results at the parent level, where the parent pays tax on the combined result. The subsidiaries do not first pay tax individually under the described consolidation process.

53. Under tax consolidation, how is corporation tax paid for the group?

The holding company pays tax on group profits, while subsidiaries pay tax on group losses.
Each company pays tax on its own result, and the holding company receives a credit for the combined result.
Each subsidiary pays tax on its own result, while the holding company reports the group total.
The holding company pays tax on the combined group result, while subsidiaries make no direct payment of that tax.

The holding company pays tax on the combined group result, while subsidiaries make no direct payment of that tax.

Explanation

Tax consolidation combines group companies’ profits and losses into one overall result, on which the holding company pays corporation tax. Separate taxation instead has each subsidiary pay tax on its individual result.

54. In the example with a 25% corporation-tax rate, how much tax does consolidation save compared with separate taxation?

It saves €150,000, reducing tax from €200,000 to €50,000.
It saves €150,000, reducing tax from €250,000 to €100,000.
It saves €250,000, reducing tax from €350,000 to €100,000.
It saves €100,000, reducing tax from €250,000 to €150,000.

It saves €150,000, reducing tax from €250,000 to €100,000.

Explanation

Separate taxation produces €250,000 in tax, while consolidating the €400,000 group result produces €100,000, a saving of €150,000. The €100,000 figure is the consolidated tax bill, not the amount saved.

55. Which conditions must be met for a group to use tax consolidation?

The holding company must own at least 95% of the group’s shares overall, and each subsidiary must pay income tax.
The holding company must own at least 95% of each subsidiary, and every group company must be subject to corporation tax.
The holding company must own more than 50% of each subsidiary, and every group company must be subject to corporation tax.
The holding company must own at least 95% of each subsidiary, and only the holding company must be subject to corporation tax.

The holding company must own at least 95% of each subsidiary, and every group company must be subject to corporation tax.

Explanation

The regime requires ownership of at least 95% of each subsidiary and corporation-tax status for every group company. A majority stake above 50% does not satisfy the stated ownership threshold.

56. Who ultimately bears the economic cost of VAT, and who collects and remits it?

The final consumer bears it economically, while the state collects and remits it through suppliers.
The taxable business bears it economically, while the state collects it directly from the consumer.
The final consumer bears it economically, while taxable businesses collect and remit it to the state.
The taxable business bears it economically, while the final consumer collects and remits it to the state.

The final consumer bears it economically, while taxable businesses collect and remit it to the state.

Explanation

VAT is an indirect consumption tax whose economic burden falls on the final consumer, while taxable businesses collect and remit it. The business handles the payment process but is not generally the person who ultimately bears the tax economically.

57. How does a taxable business determine the VAT amount it remits to the state?

It deducts VAT paid on purchases from VAT collected on sales and remits the difference.
It adds VAT paid on purchases to VAT collected on sales and remits the combined amount.
It remits all VAT collected on sales and claims VAT paid on purchases from customers.
It deducts VAT collected on sales from VAT paid on purchases and remits the difference.

It deducts VAT paid on purchases from VAT collected on sales and remits the difference.

Explanation

The business offsets deductible VAT paid on purchases against VAT collected on sales, then remits the difference. Reversing the two amounts confuses output VAT with deductible input VAT.

58. Which activity meets the definition of a taxable person for VAT purposes?

An employee’s work carried out for wages under an employer’s direction.
A private person’s gratuitous activity carried out without consideration.
A dependent economic activity carried out without receiving consideration.
An independent economic activity carried out for consideration.

An independent economic activity carried out for consideration.

Explanation

A taxable person carries out an economic activity independently and for consideration. An employee’s activity does not meet the independence condition, even when the employee receives wages.

59. How does an exempt transaction differ from a transaction outside the scope of VAT?

An exempt transaction is taxable at a reduced rate; an out-of-scope transaction is taxable at the standard rate.
An exempt transaction is outside VAT’s scope; an out-of-scope transaction is within the scope but exempted by law.
An exempt transaction is subject to VAT only for businesses; an out-of-scope transaction is subject to VAT only for consumers.
An exempt transaction is within VAT’s scope but exempted by law; an out-of-scope transaction is not subject to VAT.

An exempt transaction is within VAT’s scope but exempted by law; an out-of-scope transaction is not subject to VAT.

Explanation

An exempt transaction falls within the VAT system but receives an exemption under the law, whereas an out-of-scope transaction is not subject to VAT. The reverse classification mistakenly swaps these two concepts.

60. How is a professional sale of a building less than five years old treated for VAT?

VAT applies to each transaction involving the building.
The sale is exempt, but the seller may elect to charge VAT.
VAT applies only when the building was acquired with VAT that could be recovered.
The sale is exempt, and the seller cannot elect to charge VAT.

VAT applies to each transaction involving the building.

Explanation

A professional sale of a building less than five years old is subject to VAT on each transaction. The exemption with an option to elect VAT applies to buildings more than five years old.

61. A professional sells buildable land bought from a private individual, with no VAT recoverable on acquisition. On what basis may VAT be calculated?

On the margin between the sale price and the acquisition price.
On the sale price after deducting all unrelated business expenses.
On the total sale price, regardless of the acquisition’s VAT treatment.
On the acquisition price alone, excluding any increase in value.

On the margin between the sale price and the acquisition price.

Explanation

When VAT was not recoverable on acquisition, such as for land bought from a private individual, VAT may be calculated on the margin. Calculation on the total sale price is associated with a case in which VAT was recoverable on acquisition.

62. A landlord rents out an unfurnished residence and an unfurnished office. Which VAT treatment applies?

The residential rental is exempt with an option for VAT, while the office rental is exempt with no option for VAT.
Both rentals are exempt with an option for VAT.
The residential rental is exempt with no option for VAT, while the office rental is exempt with an option for VAT.
Both rentals are exempt with no option for VAT.

The residential rental is exempt with no option for VAT, while the office rental is exempt with an option for VAT.

Explanation

Bare residential rentals are exempt without an option to charge VAT, while bare office rentals are exempt with an option. The treatment therefore differs according to whether the bare premises are residential or office space.

Study with flashcards

Lock in the answers with 88 flashcards on French Business Taxation.

How many members does a single-member company have?

One member.

How are members’ debts limited in a limited-liability company?

To their contributions.

What predominates in a partnership?

The members’ personal characteristics.

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