Tax Dependent exemption- What is a tax exemption?
Tax exemption, sometimes called exemption from tax is essentially an exemption from paying tax lavished by law in some cases to individuals or legal persons. Tax exemption is a generic term: in practice, there are several situations in which a company or a person can benefit from a tax exemption.
Characteristics of a tax exemption
A tax exemption can be partial or total. If it is partial, it will exempt the person or business from paying part of the tax. If it is total, the beneficiary will be completely exempt from paying the tax in question. Most tax exemptions are temporary, that is, they are time-limited. However, there are some tax exemptions that are permanent. Many IRS dependent exemptions are first total, and then become partial over time, until they are no longer valid.
Forms of tax exemption
Tax exemptions can relate to different elements. Most often, corporate tax exemptions relate to the taxation of profits, that is to say corporate tax or income tax.
There are also tax exemptions relating to other taxes, such as the business property assessment (CFE) which is a local tax. Companies located in urban free zones – entrepreneur territories (ZFU-TE) which hire employees residing in the same urban area are eligible to benefit from tax exemptions if they meet certain conditions. The conditions relate to the number of employees, the amount of turnover, the type of activity carried on by the company, and the holders of the capital of the company if it is a company. They are detailed on the service-public site.
If the company established in ZFU-TE is eligible, it can then benefit from an exemption from income tax for 8 years. The exemption rate is 100% the first 5 years, then decreases until reaching 20% exemption the 8th year. To be able to benefit from these tax exemptions on profits, the company must obtain information and carry out the administrative formalities with the corporate tax services (SIE).
Tax exemptions in rural revitalization zones
Due to their contribution to the revitalization of rural areas, companies located in rural revitalization areas (ZRR) can benefit from tax exemptions relating to income tax or corporate tax under certain conditions. The conditions to be met in order to benefit from these tax exemptions relate to the activity carried on by the company, the tax regime, the number of employees and the ownership of capital.
Some companies cannot take advantage of this default tax exemption. This is the case, for example, of companies making agricultural profits (BA). In addition, its capital must not be more than 50% owned by other companies. Finally, the company must be created from top to bottom, that is to say that the creation of a company must not be a takeover, a transfer, a concentration, a restructuring or an extension of activity. If the SME is eligible, it can benefit from a total profit tax exemption from the creation of a company and for the following 23 months if the company is eligible.
Tax exemptions for corporate gifts, another type of tax exemption that companies can sometimes benefit from is the tax exemption on corporate gifts. Certain gifts made by the company to its customers can be deducted from the taxable profit of the company as long as they comply with the law, their value is not excessive and they contribute to the smooth running of the business.