Strategizing Multinational Tax Risks

The French Parliament has approved the 2016 Finance bill, subject to constitutional review. A summary of the provisions are provided in EY’s Global Alert:

Click to access 2015G_CM6081_French%20Parliament%20approves%20Finance%20Bill%20for%202016%20and%20Amending%20Finance%20Bill%20for%202015.pdf

Key points:

• Country-by-Country (CbC) reporting is adopted for French parented multinational companies, consistent with OECD Guidelines.
• Compulsory e-filing.
• Annual filing of transfer pricing documentation.
• Effective 1/1/2016, intra-French distributions will be subject to a 1% taxable income inclusion, as well as distributions received from EU or EEA qualifying subsidiaries.
• The general anti-abuse clause of the amended EU Parent-Subsidiary Directive is adopted.
• The 2015 AFB amends the French participation exemption regime, as well as the withholding tax (WHT) treatment applicable to dividends distributed by French entities to EU resident entities, in order to comply with the EU Directive 2011/96/UE dated 30 November 2011.

The new rules pose additional burdens for distributions within a French tax group, while recognizing CbC reporting and being proactive with respect to the filing of transfer pricing documentation.  Accordingly, it should be followed as other countries adopt similar rules in the near future.