VAT - Wage Tax

Taxable base - Article 231 of the French Tax Code - Employers liable to VAT on less than 90% of their sales - Determination of the percentage of wages taxable.

1. An administrative appeal court decision recently ruled that the fact that a taxpayer has set up distinct business sectors subject to different VAT deduction rules cannot be raised for the determination of wage tax (taxe sur les salaires) (CAA Nantes, Nov. 12, 1996, no. 94.657).

2. Wage tax acts as a 'top-up' to VAT by taxing companies that are not subject to VAT on at least 90% of their sales. Prior to the application of the law no. 93.1353 dated December 30, 1993, the basis of computation of the wage tax was determined with reference to the percentage of deduction of input VAT (pro-rata). For example, if a company's VAT pro-rata was 60%, the company was liable to 40% of its theoretical wage tax bill.