FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

TAXATION
French Taxation
Pursuant to Article 125 A-III of the French Tax Code, a 16% withholding tax is levied on interest
payments made by a French debtor to a non French tax resident. However, Article 125 A-III paragraph
2 of the French Tax Code provides for a withholding tax exemption with respect to interest
payments deriving from notes (obligations) issued on or after 1 October 1984. In order to benefit from the
exemption, the beneficiary of the interest must establish (i) that it is not a resident of France for tax
purposes and (ii) that it is the beneficial owner (bénéficiaire effectif) of the interest payments.
All payments in respect of the Notes will be made without withholding or deduction for or account of
French tax provided that the aforementioned conditions are satisfied.
A Noteholder will not be subject to French income taxes (other than withholding taxes) in respect of any
payments under the Notes, provided that such holder is neither domiciled in the Republic of France nor
deemed to be resident, established or carrying on an activity in the Republic of France for French tax
purposes.
European Union Directive on the Taxation of Savings Income
On 3 June 2003, the Council of the European Union adopted a new directive regarding the taxation of
savings income (2003/48/EC) (the ‘‘Directive’’). The Directive is applicable to interest payments made as
from 1 July 2005.
Under the Directive, each Member State will be required to provide to the tax authorities of another
Member State, inter alia, details of payments of interest within the meaning of the Directive (interest,
products, premiums or other debt income) made by a paying agent established in the first Member State
to or for the benefit of an individual (or certain residual entities) resident in that other Member State (the
‘‘Disclosure of Information Method’’). In this way, the term ‘‘paying agent’’ is defined widely and includes
in particular any economic operator who is responsible for making interest payments, within the meaning
of the Directive, for the benefit of individuals (or certain residual entities).
However, throughout a transitional period (the ‘‘Transitional Period’’), Austria, Belgium and Luxembourg,
instead of using the Disclosure Information Method used by other Member States, would withhold an
amount on interest payments. The rate of such withholding tax will equal 15% during the first three years,
20% during the subsequent three years and 35% until the end of the Transitional Period. The Transitional
Period has commenced on 1 July 2005 and is to terminate if and when the European Union enters into
agreements on exchange of information upon request, with several jurisdictions (including the United
States, Switzerland, Liechtenstein, San Marino, Monaco and Andorra).
The Directive was implemented into French law by the Amended Finance Law for 2003 dated 30/12/2003,
by the administrative guidelines (Instruction 5 I-03-05 published 08/12/2005), by the Decree # 2005-330
dated 6 April 2005 (section 242 ter of the Code Général des Impôts (CGI), and by the Decree # 2005-132
dated 15 February 2005 (sections 49 I ter, 49 I quater, 49 I quinquies, 49 I sexies of annex III to the CGI).
These provisions impose on paying agents based in France an obligation to report to the French tax
authorities, certain information with respect to interest payments made to beneficial owners domiciled in
another Member State (or certain territories), including, among other things, the identity and address of
the beneficial owner and a detailed list of the different categories of interests (within the meaning of the
Directive) paid to that beneficial owner. These reporting obligations have entered into force with respect
to interest payments made on or after 1 July 2005. The paying agents have nevertheless been required to
identify the beneficial owners of such payments as from 1 January 2004.
The attention of Noteholders is drawn to Condition 8 (Taxation).
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