Doing Business in France - RSM International

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4.2.4 Depreciation and provisions French companies must apply the new accounting rules on asset amortization and depreciation to their corporate and consolidated accounts (CRC regulation 2002- 10 of December 12, 2002). This change in accounting rules has an impact on the tax treatment of depreciable assets. In particular, the new rules implement the “per component” depreciation method (méthode d’amortissement par composants). Under this method, companies must account for and depreciate the principal components of tangible assets separately when such components must be frequently renewed, have different uses or provide economic benefits that vary over time. Based on the French tax rules, the taxpayer may use three main depreciation methods to determine its tax-deductible allowances: i. The straight-line depreciation which must be applied to all assets that are ineligible for the other methods mentioned below. As a general principle, straightline depreciation rates are computed by dividing the expenditure by the estimated useful life as determined in accordance with the accepted business practice. ii. iii. iv. The accelerated depreciation (declining-balance depreciation). This method is optional and applies only to assets that are new or renovated, have an estimated useful life of at least 3 years and are not expressly excluded from the scope of this method. The exceptional depreciation is optional and applies to assets expressly designated in the French Tax Code (software, energy-saving equipment, etc.). Provisions are tax deductible only if certain conditions are fulfilled: (i) the loss or charge to which the provision applies is specific in both its nature and its amount. Such loss or charge should itself be deductible and clearly identified (ii) the corresponding loss or charge must be probable and not merely possible, (iii) the likelihood of the loss or charges should result from the factual situation that exists at the time the provision was recorded, (iv) the provision must be recorded in the company’s books. 26 | DOING BUSINESS IN FRANCE
4.2.5 Controlled Foreign Company (CFC) Profits made by Controlled Foreign Companies (CFC) that are established in a low-tax countries and whose parent company is subject to French corporate tax are subject to said tax at the French parent company’s level (i) wherever the French company directly or indirectly holds more than 50% of the shares in the subsidiary and (ii) wherever it cannot be proven that the subsidiary’s main activity is truly industrial or commercial carried on with non affiliated companies in said low-tax country. Safe-harbor clauses are provided by the French Tax Code in particular for CFC established in the European Union. 4.2.6 Transfer pricing The French Tax Code allows the French Tax Authorities to levy tax on a French enterprise that transfers profit to a related entity located abroad, if the inter-company transactions are not carried out at an arm’s-length price. In addition, the French Tax Authorities are allowed to request information and documentation involving transactions between associated enterprises. In practice, the French Tax Code provides that if, in the context of a tax audit, the French Tax Authorities have gathered sufficient evidence to presume that the French company transferred profits abroad, they may require said company to provide the following documents and information: i. the features of the commercial relations existing with foreign affiliated enterprises with which transfers of profits are deemed to have occurred; ii. iii. iv. the method used to set the prices of the industrial, commercial and financial operations carried out in the above affiliated enterprises, as well as evidence supporting this method and potential forms of consideration granted; the activity carried out by the affiliated enterprises with which transfers of profits abroad are deemed to have occurred; the tax treatment applied to the above operations by the foreign affiliated companies in question. These information and documentation must be provided to the Tax Authorities within two months after request. If the company fails to reply or does not provide sufficient information, a €10K fine may be incurred for each fiscal year in question. Moreover, the Tax Authorities may, in that case, calculate the amount of the profit transfer on the basis of any information they may have in their possession. DOING BUSINESS IN FRANCE | 27
Page 1 and 2: Doing Business in France
Page 3 and 4: Foreword RSM International RSM Inte
Page 5 and 6: Contents 1 General Information 4 Ge
Page 7 and 8: Lake Cap-de-Long in Hautes, Pyrenee
Page 9 and 10: The legislative branch is composed
Page 11 and 12: 2 Types of business organisations 2
Page 13 and 14: 2.2.1.2 Private Limited Company und
Page 15 and 16: 2.2.2.3 Simplified Join Stock Compa
Page 17 and 18: 2.3 Dissolution and liquidation of
Page 19 and 20: 3 Employment Labor relations are go
Page 21 and 22: 3.4 Termination of the employment c
Page 23 and 24: 3.6 The social security system Fran
Page 25 and 26: 3.7.3 Employee treatment in France
Page 27 and 28: Group treatment Incentives Anti-avo
Page 29: 4.2.3 General Expenses General expe
Page 33 and 34: 4.2.7.1.2 Withholding tax on intere
Page 35 and 36: Croatia 0 0 0 15 0 0 0 Cyprus 0 3 0
Page 37 and 38: Switzerland resident control13 non-
Page 39 and 40: Secondly, if the amount of interest
Page 41 and 42: 4.2.10.2 World tax consolidation Re
Page 43 and 44: 4.4.2 Research and development (R&D
Page 45 and 46: La Défense - the main business dis
Page 47 and 48: 4.6.1.2 Establishment of overall in
Page 49 and 50: 4.6.2.3 Calculation Net wealth tax
Page 51 and 52: 4.7.2.2 Apprenticeship tax (taxe d
Page 53 and 54: 5 Accounting regulations & standard
Page 55 and 56: St. Stephen’s Cathedral, Vienna S
Page 57 and 58: 5.8 Adoption of IFRS in France The
Page 59 and 60: Lyon/South East France RSM CCI Cons
Page 61 and 62: Notes
Page 63 and 64: Palais de la Bourse, Bordeaux DOING

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