09 Apr TAX ALERT – Spontaneous tax regularization for companies: The SMEC’s competence is extended
Spontaneous tax regularization for companies: The SMEC’s competence is extended
The Law for a State at the service of a -trust based society (Essoc Law No. 2018-727 on August 10th, 2018) provided for the implementation of a new trust-based relationship between companies and the French Tax Authorities (“FTA”) and allowing the regularization of certain transactions in the course of a spontaneous tax regularization procedure, outside of any pending tax audit.
1. Set up in this context, pursuant to the Ministerial Circular on January 28th, 2019, the Regularization Office for Companies (so-called “SMEC”) is competent for tax regularization concerning:
- tax discrepancies discovered by the new company’ owners or acquirers, should they be discovered before or after the acquisition;
- hidden activities in France constituting a permanent establishment;
- deduction of all or part of interest paid for a loan granted by a foreign company, in violation with the provisions of Section 212 of the French Tax Code (“FTC”);
- Illegal or abusive schemes, notably those involving foreign entities;
- questions related to the taxation of companies’ managers (tax regime for impatriates, non-compliance with the conditions of a Dutreil agreement, failure to tax capital gains on the sale of shares, schemes published on the “impots.gouv.fr” website and notably “management package” schemes and the abusive use of PEA;
- and in general, any transaction likely to be subject to sanctions for hidden activity (Section 1728, c of the FTC) or for abuse of law or fraudulent maneuver (Section 1729, b and c of the FTC).
2. In a Ministerial Circular on March 8th, 2021 – replacing the Ministerial Circular on January 28th, 2019 (mentioned above) – the SMEC’s competence is extended in order to reinforce the fight against tax fraud and to enable companies and/or their managers who wish to do so, to spontaneously regularize their tax situation concerning:
- all offences that are likely to be subject to the 40% penalty (Section 1729 of the FTC) committed by entities under the jurisdiction of the “Service des grandes entreprises”;
- and all requests for tax regularization which evidence difficulties either in computing the amount of the corrections, or in assessing the periods covered by the statute of limitation, or in processing difficulties resulting from the number of taxpayers involved in a transaction.
3. The latter circular also introduces a general principle of regularization by stating that, in all other situations, “requests for regularization should be filed to the tax department usually in charge of receiving the tax returns“.
4. It should be recalled that in all cases, the request for tax regularization must be spontaneous, which excludes companies that are under a tax audit, those that have been notified for a tax audit or those that are under an administrative or criminal investigation.
La Tour International law firm remains at your entire disposal for any further information you may need and to provide you with assistance in the context of a tax regularization procedure.
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