Doing Business in France - RSM International

In addition, any subsidiary member of the tax-consolidated group must be at least 95%
held, directly or indirectly, by other French tax-consolidated companies, eve through a
foreign EU subsidiary or permanent establishment for financial years ending as from
December 31, 2009.
Specific adjustments are made for the determination of the consolidated tax result.
Waivers of debt as well as direct and indirect subsidies are neutralized in a taxconsolidated
group by (i) adding the waived sums or subsidies back into the results of
the company granting the waiver or subsidy and (ii) deducting said sums from the results
of the company benefiting from such advantages.
Any dividends that subsidiaries pay to other group members are neutralized. The 5%
service charge applicable in the event of a distribution to a parent company is neutralized
if the distributing company has been a member of the group for more than one year.
In addition, according to specific provisions, called Amendement Charasse rule, financial
costs that a group incurs to purchase shares in a company already controlled by related
company is not tax-deductible if the company whose shares are purchased becomes
a member of the tax-consolidated group. The non-deductible amount is the portion
of the group’s financial charges that is equal to the ratio of the purchase price of the
shares to the total average of the group’s debt. Said provisions do not apply, however,
when “associated companies” purchase the shares from unrelated parties in order
to immediately place them under a related French entity or when the share transfer
is carried out between companies in a tax-consolidated group. When the purchased
company leaves the group, the added-back of interest ceases.
If a tax-consolidated company ceases to be a member of the group, the consequences
are in particular as follows: (i) the departing company’s taxable result is not included in
the group’s taxable result for the financial year of the departure, (ii) indirect subsidies
resulting from transfers of fixed assets at price lower than their fair market value are
added-back into the taxable result for the year of departure of the company benefiting
from such transactions (iii) the other subsidies and waivers of debt are added back into
the taxable result for the year of the departure of the company receiving or paying them,
but only where they have been deducted from the group’s taxable result in one of the
five years preceding the departure.
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