What is a tax consolidation group?

A tax consolidation group allows companies belonging to the same legal group to consolidate their tax results and to be taxed directly at the level of the head company.

The tax consolidation system has many advantages, but it is subject to a number of conditions.

 

I – Conditions of creating a tax consolidation group

 

In order to belong to a tax consolidation group, a number of conditions must be met. Thus, the companies belonging to the group must :

• be subject to corporate income tax in France
• have an identical financial year-end
• be at least 95% owned directly or indirectly by the head company of the group

 

The parent company, known as the head of the group, must not be more than 95% owned by a company that meets the conditions for integration.

The option is exercised with the company tax department, is valid for a period of 5 years and is tacitly renewable (as long as the option is not terminated).

Failure to comply with any of these conditions will result in the exit of the subsidiary concerned from the tax consolidation group or in the termination of the tax consolidation group (if it is the condition relating to the shareholding of the head company that is no longer met) and the loss of the related benefits.

 

II – The advantages and disadvantages of a tax consolidation group

The tax consolidation system has many advantages, including :

• Offsetting of deficits of group member companies since the result is consolidated at the level of the group head company
• The exemption of dividends paid between intra-group companies with the reintegration of a share of costs and expenses of 1% (compared to 5% under the parent company-daughter regime)

On the other hand, subsidiaries belonging to the group lose the reduced SME rate of 15% for which they could possibly be eligible.

 

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