The French Parliament has announced rules for the transmission of the French Country-by-Country (CbC) reports by US MNE’s, although it is yet not 100% certain whether such rules are penalty proof or 100% certain.
As the US has not formally named France as a partner exchanging such information, these dialogues apparently continue. Thus, all taxpayers should be monitoring this important area through year-end for future developments and additional certainty.
EY’s Global Tax Alert summarily describes the applicable procedures.
The French Parliament has adopted the Finance Act for 2016, in addition to amendments of the 2015 Finance Act. A comprehensive summary by Bird & Bird is provided for reference:
- Country-by-country (CbC) reporting, effective for the 2016 tax year, for French based MNE’s and other companies not subject to a CbC requirement. (Note for US MNE’s: under the proposed Regulations, this would require CbC reporting in France, and other countries, for 2016 whereas the 2017 tax year would be reported to the IRS in the US)
- Penalty up to EUR 100k if a CbC report is not filed.
- In addition to current French regulations for transfer pricing information, a new requirement has been added: Identification of jurisdictions where intra-group transactions are conducted or where group members own intangible assets.
- The 10.7% exceptional contribution on corporate income tax has not been extended, thereby lowering the total effective tax rate. Calendar year taxpayers will not be subject to this charge for 2016.
- Dividend distributions commencing in 2016 within a French fiscal group, or from an EU member, is subject to a 1% (vs. 5%) income inclusion, to bring its legislation into compliance with European law.
- The EU Parent-Subsidiary Directive’s provisions are adopted: Anti-abuse de minimis clause including a “main purpose” or “one of the main purposes” test. Additionally, “an arrangement or a series of arrangements shall be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.”
- An advisory committee for the research tax cried and innovation tax credit has been created.
The new legislation highlights new trends that may be followed by other countries:
- Significant penalties for non-filing of required CbC reports.
- Additional subjectivity for anti-abuse provisions.
- Legislation that has been adopted to conform with the European Court of Justice determinations.
- Additional information reporting, including a focus on IP ownership.
All MNE’s should review these new provisions with a global perspective, not only with respect to companies operating in France.
France’s lower house of Parliament has approved an amendment that would require public reporting of country-by-country (CbC) information. The amendment will need approval by the Senate, with final confirmation by the French National Assembly before being enacted.
This step represents another move forward, along with the EU proposals, to provide CbC information to the public domain.
Multinational companies should prepare today for public CbC reporting in the near future, as the cannon shots have been fired and they will soon land, resulting in a multitude of inquiries and perceptive conclusions. Additionally, organisations should have a seamless process to receive, review and decide on communicative courses of action in response.