Global

Details

  • Service: Tax, Global Transfer Pricing Services, International Tax
  • Type: Regulatory update
  • Date: 12/31/2013

France - Exceptional tax on €1 million salaries 

December 31: France's Finance Bill for 2014 (published 30 December 2013) includes an “exceptional” tax (surcharge) on salaries and remunerations exceeding €1 million when paid to individuals in 2013 and 2014 by enterprises established in France.

The exceptional tax, imposed with a 50% rate, is computed on “individual remunerations” (a term that is broadly defined) exceeding €1 million, and is capped at 5% of the enterprise’s turnover.


This enacted measure was approved by the Constitutional Court (Conseil Constitutionnel). Other provisions in the Finance Bill for 2014, however, were rejected by the Constitutional Court (in general, because of inaccuracies in the legislative language).

Transfer pricing measures

In brief, the transfer pricing provisions in the Finance Bill for 2014, as approved by the Constitutional Court, include:


  • A limit on the tax deductibility of interest on related-party loans
  • A requirement for the mandatory supply of “analytical accounts” to the French tax authorities during a tax audit
  • A requirement for the mandatory supply of “consolidated accounts” to the French tax authorities during a tax audit of certain taxpayers
  • Repeal of a provision automatically staying the collection of tax when a French taxpayer files a mutual procedure agreement (MAP) case

Read TaxNewsFlash-Transfer Pricing: France - Transfer pricing provisions enacted in Finance Bill 2014

Provisions rejected as unconstitutional

The following provisions in the Finance Bill for 2014 were “censured” (rejected) by the Constitutional Court, generally for an inaccuracy in wording, and thus not enacted:


  • A requirement for disclosure to the French tax authorities of tax planning / optimization schemes
  • An increased penalty equal to 0.5% of the taxpayer’s turnover when the taxpayer fails to provide the tax inspector with a compliant transfer pricing documentation report (the penalty remains 5% of the re-assessed amount)
  • A broadened definition of “abuse of law” (thus, not expanded to include acts whose main purpose—and no longer the “sole” purpose—is to avoid or alleviate the taxpayer’s tax burden)
  • A requirement for “compulsory remuneration” for a transfer of risk(s) or function(s) from a French entity to a foreign related entity (thus, no burden of proof for a French company to show it has benefited from appropriate compensation if its operating results during the two fiscal years (FYs) following the transfer are less (by at least 20%) than the average amount of the operating results derived from the three FYs prior to the change)

In addition, regarding the Amending Finance Bill for 2013, the French Constitutional Court also “censured” (rejected) provisions that were to take into account the amount of tax credits for purposes of calculating the French profit-sharing reserve.

KPMG observation

It is reported that the government of France is modifying the anti-tax fraud and transfers-of-benefits-abroad regulations. Further, it is anticipated that, during 2014, it could be possible that new reinforcement provisions to these rules could be addressed by legislation.



For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group (Fidal*) in Paris:


Pascal Luquet

+ 33 1 55 68 15 22


Olivier Kiet

+ 33 1 55 68 16 15


Kate Noakes

+ 33 1 55 68 16 57


Xavier Sotillos Jaime

+33 1 55 68 14 85


*Fidal is an independent legal entity that is separate from KPMG International and its member firms.




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Washington, DC 20006.

 

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