Doing Business in France - RSM International

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As from January 1st, 2010, companies that meet certain thresholds (notably that have an annual turnover of at least €400,000K, excluding tax, or that belong to a tax-consolidated group which meets the revenue threshold) are required to have a transfer pricing documentation available to the French Tax Authorities at the beginning of a tax audit or, at least, to provide them with the required documentation within 30 days upon request. At last, please note that French law provides for bilateral ruling procedure (Advance Pricing Agreement, APA) which aims at avoiding the risks of double taxation and to provide a French entity with a guarantee that the Tax Authorities will not challenge its transfer pricing policy. 4.2.7 Withholding taxes, International agreements & European Union regulations 4.2.7.1.1 Withholding tax on dividends From a domestic standpoint, dividends paid by a French company to its foreign parent company are in principle subject to a 25% withholding tax. However, this tax can be reduced or eliminated when a tax treaty applies (please see § 5.2.8.1.6). In addition, dividends paid to parent companies established in an EU Member State are exempt from said withholding tax under certain conditions. In particular, the parents must hold directly at least 10% of the share capital and the voting rights of the subsidiary continuously for at least 2 years. In addition, as from March 1, 2010, dividends paid to an entity established in a noncooperative country / territory are subject to a 50% withholding tax (please see below the list of countries concerned updated as of January 1st, 2011): Anguilla Belize Brunei Costa Rica Dominica Grenada Guatemala Cook Islands Marshall Islands Liberia Montserrat Nauru Niue Panama The Philippines Oman Iles Turques-et-Caïques Saint Vincent and the Grenadines 28 | DOING BUSINESS IN FRANCE
4.2.7.1.2 Withholding tax on interest Up until March 1, 2010, interest paid by French companies to foreign companies was, in principle, subject to a withholding tax of 18%. However, most of the interest was exempted under specific provisions of the French Tax Code. As from March 1, 2010, only the interest paid by French companies to entities established in a non-cooperative country / territory (please see the list above) is subject to a withholding tax, at an increased rate of 50%. Interest paid to entities established in other countries is exempt from a domestic standpoint. 4.2.7.1.3 Withholding tax on royalties Royalties paid by French companies to foreign companies are, in principle, subject to a withholding tax of 33,33%. This rate can be reduced or eliminated when a tax treaty applies. As from March 1, 2010, this rate is increased to 50% for royalties paid by French companies to entities established in a non-cooperative country / territory (please see the list above). In addition, outbound royalty payments are exempt from the 33.33% withholding tax provided that the beneficial owner of the payment is an “associated company” (according to EU requirements) and is resident in an EU Member State. In particular, a minimum holding of 25% in the capital of the paying entity is necessary. 4.2.7.1.4 Withholding tax on foreign companies’ branches in France Foreign companies’ French branches are subject to corporate income tax. In addition, for French tax purposes, such branches’ after-tax profits are deemed to be distributed to the foreign company’s shareholders. Therefore, a 25% withholding tax applies to their after-tax profits. The French branches of companies established in EU Member States are, however, exempt from said withholding tax. In addition, the above rate can be reduced or eliminated when a tax treaty applies or when evidence can be provided that the foreign company has distributed no dividends. It can also be eliminated on any distributions that the foreign company makes to French residents. DOING BUSINESS IN FRANCE | 29
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 and 30: 4.2.3 General Expenses General expe
Page 31: 4.2.5 Controlled Foreign Company (C
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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