France Hardens its Tone against Tax Havens
Supporting Your Business
February 2010
France Hardens its Tone against Tax Havens
The French Finance Law 2009 which was presented on 16 November 2009, proposes a series of measures intended to reinforce the fight against tax evasion, in respect of non-cooperative countries. These measures would be applicable from 1 January 2010.
Firstly, each year, a black list of non-cooperative states would be established, which would be characterized by i) non membership of the EU, ii) the failure to have concluded at least 12 double tax treaties, and iii) the absence of such a finalised double tax treaty with France.
This black list would be updated each year, taking into account the signature of new treaties with France, as well as the effectiveness of exchanges of information during the past year: certain “white” listed countries, in effect, could be demoted and put on the black list, if France considers that in respect of information obtained through exchanges, the quality was inadequate.
As of January 2011, only treaties containing exchange of information which had actually entered into force would count towards the cooperative nature of a state.
This hardening of approach is accompanied by increased taxation of amounts contributed to or received from, a non-cooperative state, as well as a hardening of the documentary requirements with regard to transactions with subsidiaries situated in such states:
• A withholding tax of 50% on the payment of dividends interest and royalties to an entity in a non-cooperative state;
• An exclusion from the benefit of the parent-subsidiary regime for French companies receiving dividends from a subsidiary located in a non-cooperative state;
• A systematic application of the anti-avoidance provision of article 123bis (taxation of financial income realized through an offshore company by individuals) in the case of the transfer of interests in entities situated in non-cooperative states;
• Transfer pricing: an increase in the documentary requirements for transactions carried out with entities in non-cooperative states.
The French parliament may round off these proposed measures with provisions concerning trusts which could concern wealth tax and gifts.