Corporate Tax 2010 - BMR Advisors

Bredin Prat
France
6 Branch or Subsidiary
6.5 Would a branch benefit from tax treaty provisions, or some
of them
France
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
As a general rule, contributions made in exchange for shares are
tax-exempt.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
As a general rule, a branch cannot benefit from tax treaty provisions
as it is not, as such, considered as a resident within the meaning of
the tax treaty.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
See question 6.4 above.
There are no specific taxes or fees.
7 Anti-avoidance
6.3 How would the taxable profits of a local branch be
determined
A foreign company’s French branches are subject to CIT under the
same rules as French companies on the profits they made within the
French territory, as if they operated independently from the
company of which they are a permanent establishment.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
Such branches are subject to French CIT. Their after-tax profits are
deemed to be distributed to their foreign shareholders, and thus
subject to a 25% withholding tax. This withholding tax may be
reduced or cancelled under tax treaties. It also does not apply to
branches of an EU-resident company that is subject to CIT.
The withholding tax can be revised on the basis of the amount of
profits that have been effectively distributed, or if the branch proves
that such profits have been distributed to a French resident.
7.1 How does France address the issue of preventing tax
avoidance For example, is there a general anti-avoidance
rule or a disclosure rule imposing a requirement to
disclose avoidance schemes in advance of the company’s
tax return being submitted
Under current law, there is no requirement to disclose avoidance
schemes in advance of the company’s tax return being submitted.
Under French tax law, tax avoidance schemes may be challenged
under abuse of law provisions (“abus de droit”) (as recently
amended by law to include the cases of fraud), if the scheme is
fictitious or: (i) seeks to benefit from a tax advantage, the grant of
which would be contrary to the objectives of the legislator; and (ii)
is exclusively tax driven.
An 80% penalty applies to tax reassessed under the abuse of law
procedure, reduced to 40% if the tax payer is neither the main
initiator of the scheme nor its main beneficiary.
Moreover, French tax law provides for a range of specific antiavoidance
regimes, such as, for example, regulations limiting
transfer pricing (see question 3.7 above) and CFC regime.
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