Tax alert - VAT and Indirect Taxes news – 1st quarter 2016

By Laurence Clot, Sophie Dorin


Mixed Financial Holding: does rebilling, on a cost price basis, of acquisition costs to subsidiaries which have carried out the acquisition of the target companies fall within the scope of VAT? What is the impact on the Holding’s rights of deduction?

In its Lagardère decision of 31 December 2015 (CAA Versailles, December 31th 2015, n°15VE00304), the administrative Court of appeal of Versailles considered that the rebilling of acquisition costs to subsidiaries that had carried out the acquisition of the target companies cannot be considered as an economic activity if it appears that the Holding had not developed its economic activities with the subsidiaries.

Revenue arising from rebilling its subsidiaries cannot thus be included in the Holding’s taxation coefficient. The Holding’s rights of deduction are thus restricted.
This decision is subject to appeal to the Supreme Court [Conseil d’Etat].

Incidental financial operations: new details 

The amount of turnover corresponding to real estate and financial operations is not included in the calculation of the “taxation coefficient” since these operations are considered as secondary. 

But an activity cannot be considered as secondary if the activity constitutes a direct, permanent and necessary continuation of the taxable activity.

In its Edenred France decision, handed down on 1 October 2015 (CE, October 1st 2015, n°369846), the French State Council [Conseil d’Etat] judged restrictively that, given the specific nature of the financial operations in question, inextricably linked to the principal activity of issue and sales of meals tickets, these financials operations constituted direct, permanent and necessary continuation of said activity. The necessary nature of the activity depends neither on whether it is mandatory under the current legislation, nor on the fact that the profitability of the company is dependent on these operations.  

Are unused and non-refundable travel tickets subject to VAT? 

Pursuant to the Air France KLM decision handed down by the Court of Justice of the European Union, on December 23th 2015, ((EUCJ, December  23th 2015, C‑250/14 et C‑289/14), sale of non-refundable travel documents is subject to VAT and VAT is due at the time of collection of payment. The ticket price represents consideration for the traveler’s right to benefit from performance of the obligations under the contract. Delivery of services is complete at the point when the traveler is able to take advantage of the agreed services provided by the contract even if the traveler does not effectively exercise the right. 

Consequently, both the operative event, as well chargeability of VAT, occur when the traveller pays for the ticket. 

Reliable audit trail : new terms for digital filing of documents originally in paper format further to the ministerial order of  7 January 2016 (NOR: FCPE1530658A)

Transfer of documents initially prepared as paper format to digital media must ensure unchanged reproduction. The result of digitization is a certified copy of the original in look and content. The digitalized document is saved and recorded in “PDF format” along with a digital signature. In the event of modification or correction of the data on a digitalized document, only the new corrected and digitalized document is held to be genuine evidence should an inspection take place. 

Payroll Tax

Remuneration paid to most company executives falls within the scope of payroll tax

From 2 March 2016, remuneration paid to managers who, pursuant to the French Social Security Code, are mandatorily affiliated to the general social security system falls within the scope of the payroll tax. 

Consequently, only the remuneration of the following does not fall within the scope of the payroll tax: member of a stock corporation governed by a management board, majority shareholder and manager of limited liabilities companies (SARL) and temporarily delegated administrators. 

The French Tax Authority’s documentation was modified after two decisions of French State Council dated 21 January 2016 – “Société Juliane” and “SAS Sovaro” (CE, January 21th 2016, n°388989 & n°388676). 


Implementation of the new European Customs Code

  • European regulation n°952-2013 has been transposed. The new European Customs Code will come into force from 1 May 2016. A 3-month transition period is planned.
  • The principal changes concern the status of an authorised economic operator and the rules on customs value. 

Extension of the statutory limitation period in customs matters

  • Statutory limitation of the French Customs Authority’s repossession right is extended from 3 years to 5 years. In particular cases, this right can be extended to 10 years.