Exemptions in Defense Restructuring Zones (DRZs)

Verified 01 May 2023 - Legal and Administrative Information Directorate (Prime Minister)

A company settled in a Defense Restructuring Area (DRA) may benefit from several tax and social security exemptions.

You should refer to the official list of DRAs to find out if your company is located in a relevant territory.

Conditions

To qualify for the exemption, the company must set up a new activity, previously non-existent in the DRA.

This new activity must first exist for a minimum period of 3 years.

This period starts on one of the following dates:

  • From the date of publication of the decree delimiting the RDA
  • If the date of this decree is after the activity, from 1er January of the year preceding the year for which the DRA is recognized. For example, if the municipality in which the activity is carried out is recognized as an RDA in the course of 2020, then the period to benefit from exemptions starts on 1er January 2019.

The new activity must be:

  • industrial, craft or commercial,
  • or liberal if it is exercised in a business subject to the SI,
  • or the rental of professional buildings with their equipment (examples: factory with manufacturing machinery, restaurant with kitchen and equipment for the public, warehouse with storage and shipping equipment).

The company must also meet one of the following 2 conditions:

  • Employ at least one full-time employee who performs duties at the premises located in the ZRD (no business travel outside the ZRD)
  • Achieve at least 25% of its HT turnover with customers located in the ZRD

2 other conditions are added:

  • The exemption applies to any company created or taken over before 31 December 2020.
  • The municipality is to be located in an area classified as an RDA since 2015.

If the activity is partly carried out outside the ZRD (taxis, building trades, personal services activities), the company is entitled to tax exemption only on its profit realized in the ZRD (office, workshop, etc.).

Neither the take-overs of existing activities in the RDA, nor the rental of residential buildings, make it possible to benefit from the exemptions.

Amount of the exemption

The exemption from income tax or business tax is total for 5 years.

For the following 2 years, the exemption is equal to:

  • 2/3 profit on 1re year,
  • 1/3 of profits on 2e year.

Approach

The institution must provide evidence that it has an actual economic activity in the area. To do so, it must provide operational elements. For example: rents, wages, invoices for purchases of products or proof of stocks of goods related to the activity.

These documents must be sent to the tax authorities at the time of the annual declaration of results.

Who shall I contact

You must attach to your income statement a special declaration and complete the necessary elements that give entitlement to this tax exemption.

Conditions

To qualify for the exemption, the company must set up a new activity, previously non-existent in the DRA.

This new activity must first exist for a minimum period of 3 years.

This period starts on one of the following dates:

  • From the date of publication of the decree delimiting the RDA
  • If the date of this decree is after the activity, from 1er January of the year preceding the year for which the DRA is recognized. For example, if the municipality in which the activity is carried out is recognized as an RDA in the course of 2020, then the period to benefit from exemptions starts on 1er January 2019.

The new activity must be:

  • industrial, craft or commercial,
  • or liberal if it is exercised in a business subject to the SI,
  • or the rental of professional buildings with their equipment (examples: factory with manufacturing machinery, restaurant with kitchen and equipment for the public, warehouse with storage and shipping equipment).

The company must also meet one of the following 2 conditions:

  • Employ at least one full-time employee who performs duties at the premises located in the ZRD (no business travel outside the ZRD)
  • Achieve at least 25% of its HT turnover with customers located in the ZRD

2 other conditions are added:

  • An establishment located in an RDA must have been created or expanded.
  • The municipality must give its approval on a case-by-case basis to each company in order to obtain an exemption from the CFE.

If the activity is partly carried out outside the ZRD (taxis, building trades, personal services activities), the company is entitled to tax exemption only on its profit realized in the ZRD (office, workshop, etc.).

Neither the take-overs of existing activities in the RDA, nor the rental of residential buildings, make it possible to benefit from the exemptions.

Amount of the exemption

The exemption from the CFE is total.

It lasts 5 years.

It shall begin either the year following the establishment of the company or the year following the extension of the establishment.

Approach

The institution must provide evidence that it has an actual economic activity in the area. To do so, it must provide operational elements. For example: rents, wages, invoices for purchases of products or proof of stocks of goods related to the activity.

These documents must be sent to the tax authorities at the time of the annual declaration of results.

Who shall I contact

The request is made to the tax authorities.

The company must apply for the exemption for each of the establishments concerned:

  • in the initial declaration of the CFE (cerfa No 14187) by 31 December of the year of establishment or change of establishment operator,
  • or in the declaration of modification of the CFE (cerfa No 14031) by 2e working day following 1er May of the year after the extension of the establishment.

Amending Declaration 1447-M-SD (CFE)

Initial Declaration 1447-C-SD (CFE)

Conditions

To qualify for the exemption, the company must set up a new activity, previously non-existent in the DRA.

This new activity must first exist for a minimum period of 3 years.

This period starts on one of the following dates:

  • From the date of publication of the decree delimiting the RDA
  • If the date of this decree is after the activity, from 1er January of the year preceding the year for which the DRA is recognized. For example, if the municipality in which the activity is carried out is recognized as an RDA in the course of 2020, then the period to benefit from exemptions starts on 1er January 2019.

The new activity must be:

  • industrial, craft or commercial,
  • or liberal if it is exercised in a business subject to the SI,
  • or the rental of professional buildings with their equipment (examples: factory with manufacturing machinery, restaurant with kitchen and equipment for the public, warehouse with storage and shipping equipment).

The company must also meet one of the following 2 conditions:

  • Employ at least one full-time employee who performs duties at the premises located in the ZRD (no business travel outside the ZRD)
  • Achieve at least 25% of its HT turnover with customers located in the ZRD

Other conditions are added:

  • Be implanted in ZRD at 1er January of the year for which the tax credit is claimed
  • Have a workforce of 11 employees or less on 1er January of each tax credit year
  • Have an annual turnover or an annual balance sheet of EUR 2 million or less
  • Carrying on a main commercial or craft activity

If the activity is partly carried out outside the ZRD (taxis, building trades, personal services activities), the company is entitled to tax exemption only on its profit realized in the ZRD (office, workshop, etc.).

Neither the take-overs of existing activities in the RDA, nor the rental of residential buildings, make it possible to benefit from the exemptions.

Amount of the exemption

The exemption is total.

It lasts 5 years.

Approach

The institution must provide evidence that it has an actual economic activity in the area. To do so, it must provide operational elements. For example: rents, wages, invoices for purchases of products or proof of stocks of goods related to the activity.

These documents must be sent to the tax authorities at the time of the annual declaration of results.

Who shall I contact

To obtain this property tax exemption, you must apply to the property tax center to which the building is attached.

The Property Tax Center will give you a special return that you must complete before the 1er January.

These are contributions for sickness, maternity, invalidity, death, old age and family allowances.

Conditions

To qualify for the exemption, the company must set up a new activity, previously non-existent in the DRA.

This new activity must first exist for a minimum period of 3 years.

This period starts on one of the following dates:

  • From the date of publication of the decree delimiting the RDA
  • If the date of this decree is after the activity, from 1er January of the year preceding the year for which the DRA is recognized. For example, if the municipality in which the activity is carried out is recognized as an RDA in the course of 2020, then the period to benefit from exemptions starts on 1er January 2019.

The new activity must be:

  • industrial, craft or commercial,
  • or liberal if it is exercised in a business subject to the SI,
  • or the rental of professional buildings with their equipment (examples: factory with manufacturing machinery, restaurant with kitchen and equipment for the public, warehouse with storage and shipping equipment).

The company must also meet one of the following 2 conditions:

  • Employ at least one full-time employee who performs duties at the premises located in the ZRD (no business travel outside the ZRD)
  • Achieve at least 25% of its HT turnover with customers located in the ZRD

If the activity is partly carried out outside the ZRD (taxis, building trades, personal services activities), the company is entitled to tax exemption only on its profit realized in the ZRD (office, workshop, etc.).

Neither the take-overs of existing activities in the RDA, nor the rental of residential buildings, make it possible to benefit from the exemptions.

Amount of the exemption

The exemption from employer contributions varies according to wages.

It is total for monthly gross earnings below €2,446.08 (corresponding to 1,4 Smic).

There is no exemption for monthly gross remuneration equal to €4,193.28 (or 2.4 Smic).

It is granted for 5 years from the establishment or creation of the company in the RDA. If the hiring takes place after that date, the exemption is not deferred accordingly.

For the first 3 years, the exemption is at full rate (at 100%). The 4e year, it is reduced by 1/3, and the 5e year of 2/3.

Approach

The institution must provide evidence that it has an actual economic activity in the area. To do so, it must provide operational elements. For example: rents, wages, invoices for purchases of products or proof of stocks of goods related to the activity.

These documents must be sent to the tax authorities at the time of the annual declaration of results.

Who shall I contact

The request to benefit from these exemptions is made to the Urssaf following the procedure indicated on their website:

Application for exemption from employer contributions by the social security procedure

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