Tax consolidation is a regime that allows a group of companies to be taxed as a single taxpayer, the parent paying corporate income tax on the aggregate result of the perimeter. In France it is known as intégration fiscale, governed by articles 223 A and following of the tax code, and its main effect is that the losses of one member offset the profits of another.
Four conditions must be met simultaneously in the French regime. The perimeter is not chosen freely:
- the parent holds at least 95 percent of each subsidiary's capital, directly or indirectly
- every member company is subject to French corporate income tax
- all members share the same twelve-month financial year with identical opening and closing dates
- the parent is not itself held at 95 percent or more by another company subject to French corporate income tax
The option runs for five years and is tacitly renewable. Each subsidiary still files its own tax return, but the tax itself is due by the parent on the group result, after neutralising certain intragroup transactions.
Tax consolidation and financial consolidation are different exercises and should never be confused. The thresholds differ: 95 percent of capital for the tax regime, control for the accounting one. The purposes differ: computing tax due versus presenting a true and fair view of the group. And the perimeters rarely coincide, so a subsidiary held at 80 percent is fully consolidated in the accounts and excluded from the tax group.
Both regimes rest on the same underlying requirement: intragroup flows recorded consistently on both sides. An unresolved intercompany mismatch distorts the neutralisations of one and the eliminations of the other. Phacet's intercompany flow reconciliation agent validates those positions before close.
