A company can benefit from a reduced corporate income tax rate of 15% instead of the standard rate of 25%. To qualify, its sales must not exceed a certain threshold, among other conditions. But how is this condition to be assessed if the company is owned by another company?
To qualify for the reduced rate of corporation tax, a company must meet all three of the following conditions: its pre-tax sales, adjusted where necessary for 12 months, must be less than €10 million; its capital must be fully paid up; and it must be at least 75% owned on a continuous basis by individuals or by one or more companies qualifying for the reduced rate.
The facts: Following a documentary audit, the tax authorities refused to apply the reduced corporate income tax rate to a company wholly owned by another company, the parent company of a tax group.
The judge specified that when a company applying for the reduced rate of corporation tax is at least 75% owned by a parent company of a fiscally integrated group, the parent company must itself meet the sales threshold conditions. In this case, the sales of the parent company are assessed by adding together the sales of each of the companies in the group.
Conclusion: In an integrated group, the parent company only benefits from the reduced rate of corporation tax if the sum of sales of its member companies does not exceed €10 million. And if a company not included in the group is owned by the parent company, the sales condition must be met by both it and the parent company.