It is important to point out the specific tax accounting rules which must be followed in connection with the determination of the net taxable income of companies subject to French corporate income tax. Every company engaged in commercial activities in France is required to keep a journal (livre journal) in which all transactions are posted on a daily basis. 

 Each year, the company must also prepare an inventory of its assets and liabilities, close its accounts as well as prepare a balance sheet (bilan), income statement (compte de résultats) and various exhibits (annexes) which sets forth certain information complementary to the information contained in the latter two documents.

 The balance sheet and income statement must be entered in the company’s balance sheet book (livre dinventaire) and general ledger (grand livre). The balance sheet book must be kept chronologically without blanks or erasures on special paper which is numbered and initialed by a judge or other governmental official; such records must be retained for ten years.

 The corporate taxpayer must file a corporate income tax return each year based on its balance sheet and income statement (CGI, arts. 53A and 223). Such tax return must be accompanied by a copy of its balance sheet, income statement and, in addition, a detailed statement of the deductions, exemptions and adjustments claimed in calculating net taxable income. Supporting documents such as invoices, receipts and the salary payments book (livre de paie) on the basis of which net taxable income is calculated need not be filed with the tax return, but must be preserved; in the event of an audit, they must be submitted to the tax administration.

 In the event that a corporate taxpayer fails to keep or produce the aforesaid accounting records, or where such records contain gross and repeated inaccuracies, errors or omissions, the tax administration is entitled to recalculate the amount of the taxpayers profits or annual turnover and assess tax thereon.  Listed corporations must, under certain conditions, prepare their consolidated accounts in conformity with International Accounting Standards. 


 A company may elect to calculate its income on the basis of either a calendar or fiscal year (CGI, art. 36). If, as a result of a change of accounting period, no balance sheet is prepared during a calendar year, the tax due for that year is provisionally calculated and paid on the net taxable income realized between the close of the previous taxable year and December 3l of said calendar year (CGI, art. 37). When the final balance sheet for the tax period including the calendar year in question is prepared, the income which had theretofore been provisionally determined is deducted from the total taxable income of such period so as to take into account the tax provisionally paid by the taxpayer. If such final balance sheet indicates that the taxable income of the taxpayer is lower than provisionally estimated, any extra tax paid is not refundable and the excess of such provisional income over such actual income may be carried forward as a loss to the taxpayers next taxable year. If a series of interim balance sheets is prepared during any calendar year, the net taxable income reflected thereon is aggregated for purposes of the assessment of income tax for the entire calendar year.

 Where, pursuant to corporate law, a company is dissolved and put into liquidation, the cessation of business operations giving rise to immediate taxation is deemed to take place only at the end of the liquidation even if the liquidation process lasts several years. For each fiscal year which expires during the course of the liquidation, the liquidator is required to pay estimated taxes on the basis of a provisional balance sheet and income statement that he must prepare on behalf of the taxpayer; the estimated taxes so paid are credited against the definitive tax liability due when the liquidation is completed. If an amount of estimated taxes which exceeds the definitive tax liability has been paid, such excess will be refunded.


 In connection with its determination of its taxable income, a company subject to French corporate income tax must use the accrual method as opposed to the cash method of accounting for business and commercial income. More specifically, income relating to sales of goods is deemed to be realized upon the transfer of title thereto and income relating to services is deemed to be realized at the time such services have been completely rendered. 


Inasmuch as French corporate income tax is, in theory, imposed not on the net income of a corporate taxpayer, but rather on the yearly increase of its net worth, special accounting rules have been developed for the valuation of a corporate taxpayers assets. For purposes of valuation, assets are divided into two principal classes: current assets, such as inventory, accounts receivable or cash, and fixed assets such as goodwill, buildings and machinery. Current assets may be defined as assets of any nature. Fixed assets may be defined as assets of any nature which are purchased or produced by the taxpayer, not for resale or transformation, but rather for long-term use as means of production or operation.