Main provisions of the second Amended Finance Bill for 2012
Institution of a 3% tax on distributions
A new contribution of 3% of the distributed amount is established on payments of dividends and renowned distributed income (including sumptuary expenses, tax reassessments …) for the benefit of the shareholders (individuals or companies, so French or foreign) by French or foreign companies subject to corporate income tax.
This new measure does not however apply, in particular to the distributions operated within a fiscal group, or those operated by an OPCVM or by a SME (small and medium-sized enterprise, in the European definition).
This tax applies to distributions paid since coming into force of the Amended Finance Bill on 18th August 2012.
Abolition of the withholding tax on dividends paid to foreign OPCVM, foreign OPCI and foreign closed-end investment companies (SICAF)
Dividends distributed to foreign OPCVM, foreign OPCI and foreign SICAF are not any more subject to the withholding tax in France.
This measure aims at putting in conformity the French legislation, further to the condemnation of France by the CJUE in May, 2012.
This measure applies for the distributions intervened as from August 17th 2012.
Increase in the rate of tax on financial transactions
The rate of tax on the acquisitions of securities (being a part of the tax on the financial transactions) established since 1st August 2012 passes from 0.1% to 0.2%.
This tax applies to the acquisitions of securities of listed French companies and the market capitalization of which is superior to 1M€.
The date of appreciation of the capitalization is set on 1st December of the year preceding the taxation year, for the transactions occurring as from January 1st 2013.
Anticipation of the 5% temporary exceptional contribution of corporate income tax
The law plans the payment of a 75% or 95% instalment of the amount estimated for the temporary exceptional contribution of 5% for the current fiscal year (as the turnover is upper or not to 1 Md€).
For the record this temporary contribution is applicable to companies whose turnover is higher than 250M€.
The anticipated installment must be spontaneously paid at the same time as the last installment of corporate income tax, which is 15th December of this year for the fiscal years closed on 31st December 2012.
Non-tax deductibility of forgiveness of debts and aids granted for financial purposes
Forgiveness of debts granted for financial purposes are no longer tax deductible.
Only forgiveness of debts granted for commercial reasons, or those granted to companies under a bankruptcy procedure are eligible for tax deductions.
The impact of this measure is quite wide and covers all types of aids: forgiveness of debts, subsidies, noninterest bearing loans, …
This measure applies to FYs closed since 4th July 2012.
Contribution to a subsidiary facing financial difficulties, followed by the sale of the shares received within a 2-year period: tax deductibility is now restricted
When a company makes an additional share capital contribution to a subsidiary having financial difficulties, and receives in exchange shares which market value at the date of issuance is lower than the book value, then the capital loss resulting from the disposal of these shares within a 2-year period is not fully deductible (the difference between the book value and the market value at the date of issuance is not tax deductible).
This provision also applies in the case of a contribution or an exchange of these shares.
This provision applies to transfers which have occurred since 19th July 2012.
Repeal of the possibility to combine a tax exempted distribution of dividend and the deduction of a loss, either a capital-loss or an allowance
The Amended Finance Bill completes the anti-abuse provisions introduced by the Finance Bill for 2011 (December, 29th 2010). It withdraws three cases in which the parent company could receive a taxexempted dividend from its subsidiary and afterwards deduct from its taxable result a loss, a capital-loss or a reserve even though this dividend distribution had impoverished the subsidiary (the loss matching the amount previously distributed as a dividend).
This measure applies to the following:
- companies which are real estate agents and which book as stock the shares of their real estate subsidiaries;
- parent companies which manage shares;
- companies which absorb their subsidiary less than two years after acquisition.
Comments of the French tax administration will be welcome, in order to assess the impact of this measure, notably on the calculation of the share of expenses (“quote-part de frais et charges”) in case a long-term capital gain is realized during the same fiscal year.
This provision applies to transactions which occurred during fiscal years ended since 4th July 2012.
Hardening the transfer of tax losses
The Amended Finance Bill provides two new rules to limit the conditions under which tax losses can be transferred and/or carried forward.
1) Conditions to obtain prior ruling for a transfer of tax losses in a restructuring are modified and restricted: Indeed the activity that caused the losses must not have been changed significantly (employment, means of exploitation, clientele) during the loss-making period and such activities will have to be maintained for at least three years after the restructuring. Moreover, losses incurred by companies whose assets are primarily composed with financial holdings or real estate holdings are no longer transferable.
2) The “Change of Activity” provision that limits the carry-forward of tax losses is clarified.
To counter a case law movement which is favourable to the taxpayer, the law gives a more precise definition of the change of activity, which pioneers to widen cases of loss of the right to carry-forward tax losses.
From now on, the disappearance of the means of production necessary to the continuance of the activity during a period of more than twelve months, or less if it is followed by the transfer of the majority of the shares, constitutes a case of termination of business leading to the cancellation of the tax losses carried forward.
Furthermore, a change of activity will be characterized if the addition or the abandonment, even partial, of an activity leads, for the financial year of its occurrence or the following one, in comparison to the previous financial year, to a variation of more than 50% of the turnover or the average size of the staff and the gross amount of assets immobilized.
However, it is envisaged that some situations could be authorized by the French tax administration by an advanced ruling.
These rules will apply to fiscal years closed on or after July 4, 2012.
Abrogation of the social VAT
The increase of the rate of VAT from 19.6% to 21.2%, which should have come into effect on October 1st 2012, is repealed.
Should you have any additional questions please contact:
Laurence Clot, Avocat Associée, Fiscalité – Attorney at law Partner, Tax
Rébecca Feliman, Avocat, Fiscalité - Attorney at law, Tax
Vaea Pery, Avocat, Fiscalité - Attorney at law, Tax
Anton Chyrkov, Avocat, Fiscalité - Attorney at law, Tax