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Free Urban Zone

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Exemption from tax on profits for setting up in free urban zones

Companies that set up and hire a local workforce in free urban zones - entrepreneurial territories (ZFU-TE) can benefit from tax exemptions under certain conditions. The General Tax Code provides for an exemption from income tax (IR) or corporation tax (IS) for profits from professional activities established in a ZFU-TE.

Companies concerned

Company created before 2019

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May benefit from the exemption, companies, regardless of their legal status and their tax system, established in ZFU-TE, having:

  • Industrial, commercial, artisanal or liberal activity 

  • Hardware implementation  

  • 50 employees maximum

  • 10 million euros in maximum turnover 

  • Whose capital and voting rights must not be more than 25% held by companies whose workforce exceeds 250 employees and whose annual turnover excluding tax exceeds 50 million euros or the annual balance sheet total exceeds 43 million euros.

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If the exemption follows a transfer, takeover, concentration or restructuring of activities that have already benefited from the tax relief, this continues for the remaining period.

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Are excluded from exemptions, companies carrying out the following activities:

  • Automotive and shipbuilding 

  • Manufacture of textile fibers 

  • Steel industry 

  • Road transport 

  • Equipment leasing, rental of non-professional buildings 

  • Agriculture 

  • Construction-sale​

 

Company created between 2019 and December 31, 2022

 

May benefit from the exemption, companies, regardless of their legal status and their tax system, established in ZFU-TE before December 31, 2022, having:

  • Industrial, commercial, artisanal or liberal activity 

  • Hardware implementation  

  • 49 employees maximum

  • 10 million euros in maximum turnover 

  • Whose capital and voting rights must not be more than 25% held by companies whose workforce exceeds 250 employees and whose annual turnover excluding tax exceeds 50 million euros or the annual balance sheet total exceeds 43 million euros

 

If the exemption follows a transfer, takeover, concentration or restructuring of activities that have already benefited from the tax relief, this continues for the remaining period.

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Are excluded from exemptions, companies carrying out the following activities:

  •         Construction automobile et navale_cc781905-5cde- 3194-bb3b-136bad5cf58d_

  •         Fabrication de fibres textiles_cc781905-5cde- 3194-bb3b-136bad5cf58d_

  •         Sidérurgie_cc781905-5cde-3194-bb3b -136bad5cf58d_

  •         Transport routier_cc781905-5cde-3194- bb3b-136bad5cf58d_

  •         Crédit-bail mobilier, location d non-professional buildings 

  •         Agriculture_cc781905-5cde-3194-bb3b -136bad5cf58d_

  •         Construction-vente_d04a07d8-9cd1-3239 -9149-20813d6c673b_

To note :The company's workforce must be respected for each financial year, and no longer on a date of the start of activity in the free urban zones - entrepreneurial territories (ZFU-TE).

Hiring clause

To benefit from the tax exemption on profits, the company must meet one of the following two conditions on the closing date of the financial year or of the tax period concerned:

  • at least50%employees on permanent or fixed-term contracts of at least 12 months reside in a ZFU-TE or in a priority district of the city (QPV) of the urban unit in which the ZFU-TE is located;

  • at least50%of employees hired on permanent or fixed-term contracts for at least 12 months since the establishment of the company reside in a ZFU-TE or a QPV of the urban unit in which the ZFU-TE is located.

 

Compliance with one of the two conditions is assessed from the second employee hired.

 

Thus, a company setting up in a ZFU-TE and employing only one employee who does not reside in a ZFU-TE can benefit from the tax exemption. But a company in a ZFU-TE which employs 2 employees benefits from the exemption only in the case where one of the employees resides in a ZFU-TE or in a QPV of the urban unit in which the ZFU-TE is located. .

Attention :These provisions only concern creations or establishments in ZFU-TEsince 2015.

Amount and Duration of exemption

Companies established in the ZFU-TE since January 1, 2015 benefit from a tax exemption on profits set at:

  • 100%for the first 5 years

  • 60%during the 6th year

  • 40%during the 7th year

  • 20%during the 8th grade

 

Profits made by activities carried out outside a ZFU-TE are excluded from the exemption and subject to the general rules.

The tax relief cannot exceed€50,000per 12 month period.

This ceiling is increased by€5,000per new employee residing in the district and hired full-time for at least 6 months.

Procedures

To benefit from the profit tax exemption, the company must send a statement of determination of the profit attached to its declaration of the result.

The company must send,before April 30of each year, a annual declaration of labor movements  to Urssaf and the Direccte on which it depends.

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The company can also ask the business tax services (SIE) beforehand if it meets the conditions to benefit from the tax relief. Without a response beyond 3 months, the exemption is considered accepted.

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In the case of a hiring, the company is required to transmit:

  • a pre-employment statement (DPAE)

  • a specific hiring declaration to Urssaf and the Direccte,at the latest within 30 daysfollowing the effective date of the employment contract.

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