Understanding the taxation of a corporate term account

What taxes apply to interest on term accounts?

Visit interest generated by a term account are subject to a number of taxes and levies. Here are the main ones.

Corporate income tax and income from term accounts

As we have seen with SARLs and SASs, the interest are integrated into the tax result and subject to the Corporate income tax ( IS ). The applicable rate depends on the company's tax bracket:

• 15 % for the first €42,500 of profits,

• 25 % for other amounts.

Example: If a company earns €10,000 in interest and generates a profit, it will have to pay 2 500 € for corporation tax, depending on the tax system and tax bracket.

Social security contributions on interest earned

Visit social security contributions also apply to interest earned on a term account. These levies are :

• CSG : 9,2 % ,

• CRDS : 0,5 % ,

• Solidarity levy : 7,5 % .

Total social security contributions are 17,2 % . These levies apply to interest net of tax (i.e. after deduction of corporation tax).

These levies apply to all companies subject to income tax or corporation tax when the interest is booked as financial products .

2 examples of taxation of term accounts

Here are 2 concrete examples:

SAS and SARL (subject to corporation tax)

The interest generated by a term account is included in taxable income of the company and subject at the the Corporate income tax ( IS ) :

• 15 % for the first €42,500 (for very small businesses)

• 25 % above this ceiling.

Interest thus increases the taxable profit of the company and can lead to higher taxation or modify access to certain public aids or tax exemptions, such as those in free zones .

In short, it's nothing special. It's simply additional income for the company.

Micro-business (subject to personal income tax):

For a micro-business or sole proprietorship subject to income tax ( IR ), interest is directly added and are taxed according to the executive's tax bracket.

Example: If the executive is in the 30% bracket, interest will be taxed at 30%.

Here again, it's quite simple. It's additional income for the manager.

Possible exemptions for certain structures

Certain structures can benefit from tax exemptions or reductions on the interest generated by their assets. term accounts .

These include :

• Non-profit associations

• Des startups innovantes (as part of the JEI - Young Innovative Company)

• Cooperatives

• Companies located in Zones franches urbaines (ZFU), Zones d'aide à finalité régionale (AFR) and Zones de revitalisation rurale (ZRR).

These structures can be exempted partially or totally from corporate income tax (IS) on the financial income . To do so, they must reinvest the funds in their core business.

For example, an association reinvesting in social actions may be exempt from corporate income tax on the interest received.

How do I declare income from a company term account?

Visit interest generated by a term account must be properly integrated into the company's accounts, with precise tax obligations.

Interest-related accounting obligations

Visit interest must be integrated into the income statement under the heading of financial products . In accounting, interest is recorded in the account 706 (miscellaneous financial income).

Accounting for interest must be carried out at each year-end, even if interest has not yet been earned.

How to include income in your tax return

To declare income generated by a term account for your tax return, you must use the following forms:

• For the IS use the form 2065 .

• For the IR you will have to report the interest on the supplementary return. 2042-C PRO .

The tax return must be filed within 3 months of the end of the company's fiscal year.

For private customers, the date depends on your department, but it is in May.

Mistakes to avoid when taxing term accounts

There are a number of common mistakes that companies must avoid if they are to avoid compromising the tax management of their income from term accounts .

Not anticipating the tax impact on cash flow

Forgetting to anticipate the impact fiscal of interest income can lead to a cash shortage to pay the company's usual expenses.

It is essential to have visibility on the interest taxation so you don't get caught short. You need to weigh up the pros and cons before opening a term account, and assess whether the operation makes real financial sense.

Neglecting regulatory changes

Visit social security contribution rates or the tax allowances can change every year. You therefore need to keep a continuous watch to keep abreast of new developments. tax developments to avoid unpleasant surprises.

Un expert-comptable or a tax expert can help you keep up with the latest tax news.

Are term accounts still subject to corporate income tax?

Visit term accounts are subject to corporate income tax (IS) for companies generating a profit (except for the exempt structures mentioned above).

On the other hand, micro-businesses and sole proprietorships are subject to income tax, as profits are taxed directly on the manager's tax return.

Are there any limits on interest taxation?

There is no no ceilings to limit the taxation of interest on term accounts .

However, certain companies may benefit from tax allowances or reductions depending on their sector or business. geographical location (urban free zones, for example).

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In a nutshell, taxation of a term account for business is relatively simple to understand, but it can have a significant impact on your cash flow.

You should therefore anticipate corporate income tax and social security contributions to avoid any unpleasant surprises.

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