Temporary deduction by SMEs of losses of their foreign subsidiaries and branches

Article 22 of the 2009 Finance Act creates Article 209 C of the General Tax Code. SMEs subject to corporate income tax (fewer than 2,000 employees, capital not held 25% or more by a large company) may deduct from their taxable income the losses of their branches or of subsidiaries at least 95% directly owned, located in an EU Member State or in a State bound to France by an administrative assistance agreement. Deducted losses are added back as the subsidiary or branch later makes profits, and at the latest in the fifth following financial year. The benefit is subject to the EU de minimis aid ceiling. The scheme applies to financial years beginning on or after 1 January 2009; its details are set by Decree No. 2009-417 of 15 April 2009.