2. n Introduction
n The legal provisions
n Widened measures
n The current trends
Codac
THE LEGAL PROVISIONS
n Transfer pricing : recent measures
n Subsidiaries situated in lowtax countries
n Suppliers located in tax havens
n Services paid abroad
Codac
3. 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
Codac
Codac
THE LEGAL PROVISIONS
nTransfer pricing : recent measures
nSubsidiaries situated in lowtax countries
nSuppliers located in tax havens
n Services paid abroad
Codac
4. 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
Codac
Codac
Art. 209B: the mechanism
X.. Bank
France
Inclusion in the
taxable profit for
60% of positive 60%
results
Subsidiary cy
Bahamas
Islands
Codac
Codac
5. THE LEGAL PROVISIONS
nTransfer pricing : recent measures
n Subsidiaries in lowtax countries
n Suppliers located in tax havens
n Services paid abroad
Codac
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
Codac
Codac
6. Contractors located in tax havens
MR X
UK
Company B
FRANCE
Company A
Jersey Island 10%
commissions
Asbestos
removal
market
Codac
Codac
THE LEGAL PROVISIONS
nTransfer pricing : recent measures
n Subsidiaries in lowtax countries
n Suppliers located in tax havens
n Services paid abroad
Codac
7. 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.
Codac
Codac
The mechanism of art. 155A
Holding
Br. Virgin Islands
IMAGE
MANAGEMENT Cy
LONDON
Apparent provider of
services
Apparent owner Wages or any
Payment of other
fees remuneration
FOOTBALL PLAYER
CLUB
LYON France Real provider of
Customer TAXATION
services
Beneficiary of Beneficial owner
services
Codac
Codac
8. n Introduction
n The legal provisions
n Widened measures
n The current trends
Codac
WIDENED MEASURES
n The Abnormal Management Act s’ Theory
n The Abuse of Law ‘s Principle
Codac
9. 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
Codac
Codac
WIDENED MEASURES
n The Abnormal Management Acts’ Theory
n The Abuse of Law ‘s principle
Codac
10. 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.
Codac
Codac
The scheme
MERREL DOW inc Usufruct agreement/
17000 shares
USA
44,5m€
99% BANK OF SCOTLAND
UK
Taxation at source:
SA MARRION 6,7m€
Merrel Dow Dividends
&
Tax credit :
FRANCE 45m€ +22,5m€
Codac
Codac
11. The normal situation
MERREL DOW inc
USA
99% Dividends : 45m€
Taxation at source: 2,3m€
&
Tax credit : 0
SA MARRION
Merrel Dow
FRANCE
Codac
Codac
n Introduction
n The legal provisions
n Widened measures
Widened measures
n The current trends
Codac
12. 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.
Codac
Codac
