France Tax Alert: Amended Finance Act for 2014

05 September 2014

Transfer pricing (Article 57 of the Tax Code): The French Tax Authorities do not have to evidence the condition of dependence and control to characterize a transfer of profits abroad if the transfer is made with a company located in a “tax shelter”. This exemption is extended to the case where the transfer is made with a company located in a non-cooperative country or territory.

Audit of electronic accounting records: Failure to provide electronic accounting records on a dematerialized support is punished by a fine equaling at least to €5,000 (previously €1,500) and, in the event of a reassessment, up to 10% of the reassessment to be paid by the taxpayer.

Failure to provide analytical accounting or consolidated accounts is punished by a fine equal to €20,000 (previously €1,500).

Regime of specific warrants (“BSPCE”) / Stock-option acquisition gain: Gains on the disposal of some warrants cannot benefit from (i) the abatement for holding period applicable to capital gains on the sale of securities and (ii) the fixed abatement of €500,000 applicable to capital gains realised by the retiring senior executives. Acquisition gain deriving from the exercise of options can no longer benefit from fixed abatement of €500,000.

FATCA (Article 1649 AC of Tax Code): Within the framework of the automatic exchange of information for tax purposes, a new form will replace the current IFU tax return. The financial institutions are allowed to proceed with automated processing of personal data to identify taxpayers and relevant accounts. Failure to provide such information duty of declaration is punished by a fine equal to €200 per account to be disclosed unless it is demonstrated that the failure is due to the client.

Exceptional contribution on CIT: Created by the Amending Financial Act for 2011 under Article 235 ter ZAA of the French Tax Code to last until December 31st, 2015, this contribution of 10.7% is extended to December 31st, 2016.

The tax consolidation regime for ICPE: Article 223 A of the French General Tax Code is created to apply the tax consolidation regime to industrial and commercial public establishments (ICPE). This article aims at ensuring the tax neutrality of the merger between the ICPE SNCF, SNCF Mobilités et SNCF Réseau authorized by an Act n°2014-872 dated August 4th, 2014.

Apprenticeship tax: The Amending Financial Act for 2013 altered the apprenticeship tax (merger of the apprenticeship tax with the complementary contribution) based on a « bonus/malus » system. A company with more than 250 employees whose ratio of apprentices was between 4 and 6% could benefit from a bonus. Amendment financial Act for 2014 turns the bonus into a tax credit offsetting against the apprenticeship tax to be paid by companies. It also provides a new allocation of the apprenticeship divided into three parts.