Consequences of the coronavirus pandemic (COVID-19) on the allocation of the tax credit for investment in Corsica
The tax credit for investment in Corsica expires on December 31, 2020. Will companies that have not completed their work by this date risk being denied the tax credit?
Reminder of the system
Provided for in Article 244 quindecies of the French General Tax Code, this mechanism allows small and medium-sized companies that make certain investments to benefit from a tax credit of 20% of the cost price of the investments.
This rate is increased to 30% for VSEs under the following conditions:
Less than 11 employees
Sales or balance sheet total not exceeding 2 million euros
Fully paid-up capital held on a continuous basis for at least 75% by individuals or by one or more companies meeting the same conditions in terms of headcount, revenue or balance sheet total, and of which at least 75% of the fully paid-up capital is directly held by individuals.
Let us recall that, since January 1, 2019, the activities of management and rental of furnished tourist accommodation are excluded from this scheme, understood, for the latter activity, as defined in Article L 324-1-1 of the Tourism Code. This would mean that the activities of furnished rentals accompanied by para-hospitality services remain eligible.
To be eligible for the tax credit, investments must be made no later than December 31, 2020, the period at which the scheme ends, it being specified that for constructions, the date to be retained is that of completion.
What about the tax credit if, due to the coronavirus pandemic (COVID-19), the work is not completed by December 31, 2020?
Many professionals, particularly in the hotel and restaurant industry, have begun work that, due to the pandemic, may not be completed by December 31, 2020.
In addition to the expenses they will have to face, which to date remain postponed and not cancelled, despite the effects of the announcement, the Administration's refusal to grant them the tax credit due to non-completion by the deadline would be catastrophic.
Of course, the Corsican deputies will mobilize so that the system is extended, or even extended to a greater number of economic agents, with perhaps an increase in the rate beyond 30%.
For the time being, it is not certain, given the state's drained financial situation, that these deputies will be heard. It is therefore strongly recommended that a request for rescript be sent to the Administration, and that force majeure be invoked.
Within the framework of the "PINEL" scheme, where the residential accommodation must be completed within 30 days, the Tax Administration has admitted that the deadline may be extended by a period equal to that during which the work was interrupted due to a case of force majeure, which in this case was constituted by a municipal order of peril preventing the continuation of the work (BOI-RES-000005-20180713).
This decision is not automatic, and therefore each company concerned will have to apply for a rescript.
Does COVID-19 constitute a case of force majeure?
In accordance with the provisions of Article 1218 of the French Civil Code, force majeure is defined as "an event beyond the debtor's control, which could not reasonably have been foreseen at the time of the conclusion of the contract and whose effects cannot be avoided by appropriate measures" and which prevents "the performance of its obligation by the debtor".
In the case of epidemics, the existing case law tends not to recognize the character of force majeure.
However, for covid-19, the situation is different, because of the scale and seriousness of the phenomenon, but also because of the declaration by the WHO of January 30, 2020, which considered covid-19 to be a public health emergency of international scope.
It should be noted that the Court of Colmar, in a decision of March 12, 2020 (Colmar, 6th ch., March 12, 2020, n° 20/01098) qualified the risk of contagion by covid-19 as force majeure in the context of administrative detention.
Consequently, if there is a risk that the work undertaken will not be completed by December 31, 2020, a request for a rescript is therefore entirely conceivable, provided that it is particularly detailed and that a favorable response is obtained.
Indeed, it will be necessary to characterize not only the force majeure but also the causal link between the suspension of the work and the impossibility of its completion by December 31, 2020.
In the event that the tax authorities do not accept the request, the matter will have to be referred to the Administrative Court.