France’s Budget Act of 2021 lays out funding for pandemic recovery
A few weeks after the French government announced its pandemic recovery plan, the Amended Finance Act for 2021 was passed on July 19, 2021, introducing new relief measures to help businesses in their recovery efforts, including the now routine extension of funding for existing supports as well as a number of more novel measures.
The recovery plan provides for an increase in France’s fiscal budget for 2021, in order to:
- temporarily extend the loss carry back rules for businesses,
- maintain until the end of 2022 the temporary 25 percent refundable tax credit for equity investments in SMEs,
- create a tax exemption for government funding received by entrepreneurs who took over a distressed business in 2020,
- postpone until January 1, 2023, the tax increase on non-road diesel fuel, which is widely used in the construction and public works sectors.
The Amended Finance Act also includes more direct stimulus for businesses, such as funding for:
- the pandemic relief fund and wage subsidy program,
- payroll tax relief measures for hard-hit sectors.
Finally, as expected, the Amended Finance Act for 2021 funds an extension of the guarantees provided under government-backed loans.
This measure, the cornerstone of the government’s efforts to support business recovery, fully aligns with the government’s incentive policy, and the measures already in place have made it more effective.
Government-backed loans are available to businesses that filed for bankruptcy after January 1, 2020, but can also be restructured under an in- or out-of-court reorganization plan establishing a new repayment schedule.
However, creditors should bear in mind that the government’s guarantee will expire after 6 years and therefore should not extend repayment beyond that term.