Article 209-0 A of the CGI provides that UCITS are valued at net asset value at each fiscal year-end, with valuation differences integrated into taxable income. This mark-to-market mechanism taxes unrealized gains before actual realization. However, it does not apply to UCITS primarily invested in equities or venture capital funds.

The standard corporate tax rate has been set at 25% since January 1, 2022, following a gradual reduction from 33.33% in 2017. This single rate simplifies the business tax environment and positions France in the European average. Small and medium-sized enterprises benefit from a reduced 15% rate on the first 42,500 euros of profit under certain conditions.

The Parent-Subsidiary Directive, transposed into Article 119 ter of the CGI, provides for a full exemption from withholding tax for European parent companies subject to holding conditions. This facilitates cross-border investment within the European Union. Bilateral tax treaties generally provide for reduced rates of between 5% and 15% for other beneficiaries.

To benefit from the reduced 15% rate, a company must meet three cumulative conditions: revenue excluding VAT not exceeding 10 million euros, fully paid-up share capital, and at least 75% ownership by individuals, directly or indirectly. These conditions aim to support smaller, locally-owned businesses.

Taxable profit is not simply the accounting result. Non-deductible expenses must be added back and non-taxable or separately taxed income must be subtracted. This mechanism is codified in Article 38-2 of the Code general des impots and is essential for assessing a company's tax position.

Taxable profit is determined by the difference between net assets at the closing and opening of the fiscal year, adjusted for contributions and distributions. In practice, one starts from the accounting result and adds back non-deductible expenses and subtracts non-taxable income. This principle is fundamental for understanding corporate taxation.

Institutional investors benefit from specific tax regimes. Insurance companies are exempt from the mark-to-market mechanism on their unit-linked investments. UCITS and AIFs benefit from partial tax transparency, with taxation at the unitholder level. Foreign pension funds may benefit from reduced withholding tax rates under tax treaties.

France has indeed concluded more than 120 bilateral tax treaties aimed at avoiding double taxation and allocating taxing rights between states. These treaties often provide for reduced withholding tax rates on dividends, generally between 5% and 15%, compared to a standard rate of 12.8%. These agreements are essential for facilitating international investment.