France implements measures to address high energy prices

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EY Global

17 Jan 2023
Subject Tax Alert
Categories Indirect Tax
Jurisdictions France
  • France has implemented two mechanisms to address high energy prices – the temporary solidarity contribution and a cap on market revenues.
Transposition into French Law of European Union (EU) Regulation 2022/1854

EU Regulation 2022/1854 notably provides for two mechanisms to address high energy prices:

  • A temporary solidarity contribution (articles 14 to 18 of the Regulation)

  • A cap on market revenues (articles 6 to 11 of the Regulation)

Both mechanisms have been transposed into French Law.

The temporary solidarity contribution
  • The temporary solidarity contribution (TSC) was established under Article 40 of the French Finance Bill for 2023 and is applicable from 1 January 2023.

  • Regarding the scope of the contribution:

    • Entities in scope: the TSC will be due by legal entities and permanent establishments carrying out an economic activity in France or whose profits are taxed in France pursuant to a Double Tax Treaty.

    • Activity in scope: at least 75% of the above entities’ French turnover for their first fiscal year beginning on or after 1 January 2022 must be derived from economic activities in the field of the extraction, mining, refining of petroleum or manufacture of coke oven products, as referred to in Regulation (EC) No 1893/2006 of the European Parliament and of the Council.

  • The contribution base is the fraction of the entity's taxable income for the first fiscal year beginning on or after 1 January 2022 that exceeds 120% of the average taxable income for all fiscal years beginning on or after 1 January 2018 and preceding the tax year. When this average is negative, it is considered to be equal to zero. The income effectively subject to corporate income tax (CIT) is taxed without the possibility to take into account any tax credits and/or reductions.

  • The contribution rate is 33% and no tax reductions and/or tax credits may be offset against such contribution. It also may not be deducted from the income subject to French CIT.

  • The contribution will be controlled, collected and paid in the same manner as the French CIT. If the taxpayer is not subject to CIT, the contribution must be paid no later than the 15th day of the fourth month following the end of the fiscal year (before May 15th if the fiscal year is a calendar year).

The cap on market revenue
  • The cap on market revenue was established under Article 54 of the French Finance Bill for 2023; the Cap on Market Revenue (CMR) is transposed into French Law through the creation of a contribution on the “infra-marginal rent” of electricity producers.

  • The “infra-marginal rent” may be explained as follows:

    • The wholesale price of electricity is based on the production cost of the last power plant utilized to meet the electricity demand.

    • This “last plant” is called “marginal” and is usually a gas or coal plant where costs of production are dependent upon the costs of such gas/coal.

    • The other plants, where production costs are lower than the “marginal plants” due notably to the fact that they were not increased by the increase in the gas/coal prices, are called “infra-marginal” (e.g., nuclear plants).

    • Such “infra-marginal” plants benefit however from the increase of the electricity prices even though their productions costs did not increase. Such windfall effect is called “infra-marginal rent.”

  • The contribution is due on the infra-marginal rent of electricity installations that meet the four following cumulative conditions:

    • The installation is located in Metropolitan France.

    • The electricity is not produced out of certain technologies for example, the combustion of various gases (e.g., coal gases, water gases, lean gases, etc.).

    • The installation is not an electricity storage unit.

    • The installation is not supplying electricity to a “small” electricity network (< 3.000 GWh of electricity consumed per year and which can be linked to other networks for up to 5% of its annual consumption).

  • Businesses for which the cumulative capacity of their power plants does not exceed 1 MW are exempted from the CMR.

  • The taxable event is the production of electricity by the above-described plant during the following periods:

    • 1 July 2022 to 30 November 2022

    • 1 December 2022 to 30 June 2023

    • 1 July 2023 to 31 December 2023

  • The tax base is the portion of the market income of the operator of the plant that exceeds a fixed threshold set by law, less a 10% deduction.

  • Such thresholds are defined in €/MWh and vary according to the electricity production technology used as well as the installed electrical capacity.

Extension of the “Energy tariff shield”

In 2022, to mitigate the increase in the price of electricity, France reduced the rate of the Tax on the Final Consumption of Electricity to 0,5 € MW/h.

Such reduced rate has been maintained to date until 31 January 2024.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Société d'Avocats, Indirect Tax, Paris
  • Jean-david Vasseur

  • Pierre De Touchet

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.