Associations and taxation: asking yourself the right questions About you
You are an association and want to know the tax rules that apply to you. You are an association and are developing a profit-making activity as a secondary activity.
You are an association in full transformation and need advice for the transition.
Taxation in France
Associations, unlike companies, do not intend to make a profit. They, therefore, basically avoid business taxes.
However, associations often develop a profit-making activity in parallel with their main associational activity. The association therefore needs to know about the tax impact of such an activity.
In what situations is an association subject to business taxes?
An association is subject to business taxes when it no longer meets the not-for-profit criteria.
An association is not-for-profit when it meets the following three criteria:
- The management must be disinterested: it must not be administered by persons having a direct or indirect interest in the operating result;
- If the association’s activity competes with that of other companies, the terms of exercising this activity must be different from that of other companies;
- The association must not exercise an activity that provides a service to companies who would gain a competitive advantage from this service
If the association no longer meets the not-for-profit criteria, it will be subject to business taxes.
What taxes are tax-paying associations liable to?
Profit-making/tax-paying associations are subject to the following business taxes:
- Corporation tax which is levied on the profit realised by the association during one year;
- The Territorial Economic Contribution (CET) which is composed of the Company Real Estate Contribution (CFE) and the Company Value-Added Contribution (CVAE)
- VAT for delivery operations of assets or services
If an association develops a profit-making activity, can it benefit from business tax exemption?
Yes, an association may develop a profit-making activity as a secondary activity and continue to benefit from business tax exemption.
To benefit from this exemption, the association must meet the following conditions:
- Its management must be disinterested;
- Its not-for-profit activities must be substantially predominant;
- The amount of its annual revenue from the profit-making activities must not exceed €63,059.
If the amount of revenue exceeds €63,059 but the not-for-profit activity is still predominant, you could consider “sectorisation” to isolate the profit-making activity from the non-profit-making activity.
If the profit-making activity becomes predominant, you could consider creating an independent structure to isolate the profit-making activity once and for all.
It is quite possible to envisage a development in various stages. Your tax lawyer will be able to answer any tax questions you may have.
Altexis offers you full support in your capacity as an association, particularly:
- We can check if one or all of your activities are liable to business taxes
- We can offer you support during the transition to profitability: isolation of the profit-making activity or switching completely towards profit-making activities
- We can help you file your tax return relating to these changes