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Seminário sobre Regulamentação da Norma Geral Antielisiva Seminário sobre Regulamentação da Norma Geral Antielisiva
Benoit DEMEULEMEESTER DGFIP DIRECTION DE CONTRÔLE FISCAL NORD
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n Introduction n Introduction
n The legal provisions n The legal provisions
n The current trends n The current trends
n Widened measures n Widened measures
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n Introduction n Introduction
n The legal provisions n The legal provisions
n The current trends n The current trends
n Widened measures n Widened measures
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n Transfer pricing : recent measures n Transfer pricing : recent measures
n Subsidiaries situated in lowtax countries n Subsidiaries situated in lowtax countries
n Services paid abroad n Services paid abroad
n Suppliers located in tax havens n Suppliers located in tax havens
THE LEGAL PROVISIONS
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Transfer pricing : recent measures
A recurring difficulty : the burden of the proof
§ * the existence of dependency links between the two companies; § * the existence of an advantage awarded to the foreign company
A response : a compulsory cooperation for the delivery of a documentation on transfer pricing , including:
The intragroup connections The Methods for prices determination Details on dependent companies’ trade policy Information on Tax assessment for transactions made abroad
with subsidiary (>50%) companies
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nTransfer pricing : recent measures nTransfer pricing : recent measures
nSubsidiaries situated in lowtax countries nSubsidiaries situated in lowtax countries
n Services paid abroad n Services paid abroad
nSuppliers located in tax havens nSuppliers located in tax havens
THE LEGAL PROVISIONS
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Subsidiaries situated in lowtax countries
• Article 209B : Positive incomes carried out by a foreign subsidiary under a privileged tax mode constitute taxable profits for the French parent company
• Precisions : • Subsidiary : > 50% • Privileged tax mode : a difference of more than 50% with the French regime
• An antiabuse clause where the subsidiary’s capital is shared by many dependent companies
• Nevertheless, a safeguard clause, for E.U concerns and subsidiaries having a real activity
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Art. 209B: the mechanism
60%
X.. Bank France
Subsidiary cy Bahamas Islands
Inclusion in the taxable profit for 60% of positive
results
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nTransfer pricing : recent measures nTransfer pricing : recent measures
n Subsidiaries in lowtax countries n Subsidiaries in lowtax countries
n Services paid abroad n Services paid abroad
n Suppliers located in tax havens n Suppliers located in tax havens
THE LEGAL PROVISIONS
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Suppliers located in tax havens
§ art. 238A institutes a presumption of non deductibility for expenses paid to suppliers or contractors located in tax havens
§ The risks : • Artificial distension of the costs • Payments not in accordance with any good and valuable consideration
§ The consequence: the reversal of the burden of the proof
§ specially targeted operations: services, financial or patent expenses
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Contractors located in tax havens
MR X UK
Company A Jersey Island
Company B
FRANCE
10% commissions
Asbestos removal market
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nTransfer pricing : recent measures nTransfer pricing : recent measures
n Subsidiaries in lowtax countries n Subsidiaries in lowtax countries
n Services paid abroad n Services paid abroad
n Suppliers located in tax havens n Suppliers located in tax havens
THE LEGAL PROVISIONS
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Services paid abroad
§ art. 155A concerns the payments to a foreign company in consideration of services carried out of France
§ The target : artists, sportpeople, models…
§ An application submitted to three (alternative) conditions : • The person holds directly or indirectly the entity
which is paid for the provided services; • It is not proven that the intermediate entity carries on
another activity than the performance of services ; • The intermediate entity is located in a lowtax
country.
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FOOTBALL CLUB
LYON France Customer
Beneficiary of services
IMAGE MANAGEMENT Cy
LONDON Apparent provider of
services Apparent owner
PLAYER
Real provider of services
Beneficial owner
Payment of fees
Wages or any other
remuneration
TAXATION
Holding Br. Virgin Islands
The mechanism of art. 155A
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n Introduction n Introduction
n The legal provisions n The legal provisions
n The current trends n The current trends
n Widened measures n Widened measures
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n The Abnormal Management Act s’ Theory n The Abnormal Management Act s’ Theory
n The Abuse of Law ‘s Principle n The Abuse of Law ‘s Principle
WIDENED MEASURES
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The Abnormal Management Act s’ Theory
A caselaw construction:
• Which allows the authorities to question transactions suspected to not be related to a normal management ;
• The most frequent applications : • Personal expenses • Liberalities or expenditures without any link with the line of business
• In the international area : • Remission of debts to parent or dependent companies • Costs supported because of unjustified advantages given to a foreign company
• Services provided to a foreign company without any consideration
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n The Abnormal Management Acts’ Theory n The Abnormal Management Acts’ Theory
n The Abuse of Law ‘s principle n The Abuse of Law ‘s principle
WIDENED MEASURES
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The Abuse of Law ‘s Principle
In order to give their real nature back, the authorities have the right to set aside, as not being opposable, the deeds, contracts or agreements, representative of an abuse of law:
• Either that these deeds are fictitious, • Or that they could be inspired by no other reason than avoiding or attenuating the fiscal charges.
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MERREL DOW inc USA
BANK OF SCOTLAND UK
SA MARRION Merrel Dow FRANCE
Usufruct agreement/ 17000 shares
99%
Dividends 45m€
44,5m€
Taxation at source: 6,7m€ &
Tax credit : +22,5m€
The scheme
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MERREL DOW inc USA
SA MARRION Merrel Dow FRANCE
99%
Taxation at source: 2,3m€ &
Tax credit : 0
Dividends : 45m€
The normal situation
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n Introduction n Introduction
n The legal provisions n The legal provisions
n The current trends n The current trends
n Widened measures n Widened measures
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THE CURRENT TRENDS
• the social responsibility of the companies is soon expected to have a short term impact on their tax behaviors.
• a reinforcement of companies obligations for more transparency is expected
• But some attempts have failed because of a strong resistance from professional environments.
