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.

©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year