Urban Free Zones (ZFU) in Greater Lyon

The ZFU system was created in 1996.

Objective

• to develop and diversify economic activity, to create social and urban integration, to create employment for local residents.

How the system works

Companies with fewer than 50 employees that operate, move to or set up in sensitive districts with more than 8,500 residents are able to apply for tax and social security exemptions.

• These districts are selected on the basis of a social and economic difficulty index.
• The exemptions are valid for five years, then for a further three to nine years at a regressive rate.

In return for these favourable conditions, companies must satisfy a specific recruitment clause:

• one third of all recruits must come from residents of the urban area’s ZUS’s

Local business tax exemption

• Companies with no more than 50 employees on the date on which the ZFU is defined or the date on which the company is created or relocated if this is later.
• Businesses created or relocated no later than 31st December 2011.
• An annual net exemption cap of €343,234 for 2007.

Land and property tax exemption

• Buildings located in a ZFU before 31st December 2011 and occupied by a business that meets the conditions for local business tax exemption in a ZFU.

Tax exemption on profits (corporation tax, income tax)

• Companies with no more than 50 employees, created or relocated no later than 31st December 2011.
• An annual income exemption cap of €100,000 per taxpayer and per 12-month period, increased by €5,000 for each employee living in a ZUS or ZFU recruited after 1st January 2006 (employed on a full-time basis for at least twelve months).

Exemption from employer’s social security contributions (social insurance, family allowances, occupational accident insurance) and from national housing assistance and transport fund contributions

Companies*

• Companies with no more than 50 employees on the date on which the ZFU is defined or the date on which the company is created or relocated, before 31st December 2011.
• The employees concerned present on the date on which the company was created in a ZFU or relocated to a ZFU, no later than 31st December 2011, or recruited within five years of the company’s creation or relocation to the zone,

Conditions: Permanent contract or fixed-term contract of at least 12 months. Subject to a cap of 50 exempt employees and an equivalent pay of less than 140% of the minimum wage.

Local recruitment clause: Companies commencing operations after 1st January 2002 are obliged, from the third recruitment onwards (the first two recruitments being eligible for exemption), to recruit or employ at least one third of their employees from the residents of one of the urban area’s sensitive zones.

Associations*

• Associations created or relocated no later than 31st December 2011.
• The employees concerned present on the date on which the association was created in a ZFU or recruited within five years of the association’s creation or relocation to the zone.

Conditions: Staff employed on the basis of a permanent contract or a fixed-term contract of at least twelve months, living in the ZFU (or in another ZUS in the same urban area as the ZFU). Subject to a cap of 15 exempt employees and an equivalent pay of less than 140% of the minimum wage.

* Companies and associations that are up to date with their social security obligations

Exemption from personal illness and maternity contributions

• Tradespeople, shopkeepers and company directors working on a self-employed basis, for existing activities on the date on which the ZFU is defined or the date on which the activity was created or relocated, no later than 31st December 2011.
• An annual net income exemption cap of €25,157 for 2007.

NB: self-employed individuals offering professional services are not eligible for this exemption.

Source: How Urban Free Zones work (January 2007) - Interministerial Delegation for Urban Affairs (DIV) - www.ville.gouv.fr