Tax newsletter – july 2019

Tax newsletter – july 2019

I. CORPORATE TAXATION

Withholding tax: application on deemed distribution – Judgement of the Montreuil Administrative Court (“TA”) on May 9th 2019, n°1800847, Société Compagnie Gervais Danone

The TA considers that a French company may request the discharge of a withholding tax on deemed distribution to a foreign non-shareholder company, when its taxable income is negative after adjustments but positive after reinstatements.

Sale at a reduced price: difference in treatment of current assets and fixed assets – Decision of the French Administrative supreme Court (“CE”) on June 4th 2019, n°418357, Société d’investissements maritimes et fonciers

The CE has just considered, with respect to the transfer of current assets, that it is for the French tax authorities to establish the facts on which they rely to invoke the abnormal nature of the transfer. In the case of the sale of a fixed asset, there is a presumption of an abnormal act if the French tax authorities establishe the existence of a significant difference between the market value and the sale price.

II. TAX AUDIT

Penalty for deliberate failure: conditions for implementation – Decision of the CE on June 7th 2019, n° 412536

The CE considers that the frequency of payments made to a French bank account from a non-declared foreign bank account cannot characterise the intention to evade tax.

Intra-group interest rates: the use of bond benchmarks is possible – Opinion of the CE on July 10th 2019, n° 429426, SAS Wheelabrator Group

The CE specifies that the company may, where appropriate, take into account the yield on bonds issued by companies in comparable economic conditions where such bonds constitute, in the circumstances considered, a realistic alternative to an intra-group loan.

III. INTERNATIONAL TAXATION

Services provided in France by non-residents: taxation in France – Decision of the Constitutional Council (“CC”) n°2019-784 – QPC from the CE of May 24th 2019, Société Cosfibel Premium

Amounts received by a company not established in France in return for services rendered by the actual service provider, in this case a French tax resident, may be taxed in the hands of the latter, even if the relevant service is only a non-essential part of a package of services invoiced to the foreign company.

Withholding tax on non-wage income: computation on a gross basis – Decision of the CC n°2019-784 – QPC of May 24th 2019, Société Cosfibel Premium

The computation of the withholding tax on the gross amount of sums paid abroad in consideration for services provided or used in France is consistent with the French Constitution.

Administrative assistance: validation of the transmission of foreign account data to the French tax authorities – Decision of the Lausanne Federal Court on July 26th 2019, n°2C 653/2018

The Federal Court authorises the transmission of data concerning more than 45,000 UBS bank accounts to the French tax authorities if the request concerns French taxpayers who have not complied with their tax obligations in France.

IV. INDIVIDUAL TAXATION

Declaration of foreign bank accounts: concept of “used” bank account – Decision of the CE on March 4th 2019, n°410492, M and Mme. A B

An account shall be deemed to have been used as soon as at least one credit or debit transaction is recorded (excluding interest income and management fees paid).

French wealth tax (“ISF”): non-deductibility of debts granted by a taxable person to his heirs or to intermediary persons – Decision of the CC n°2019-782 – QPC of May 17th 2019

The CC considers that the difference in treatment between ISF debtors (depending on whether they contract their debt towards an heir or a third party) is justified, but it specifies that the provisions do not prevent the debtor who wishes to deduct such a debt from proving its existence and sincerity.

Exercise of options: tax treatment of gains resulting from the exercise of options in the event of expatriation – Decision of the CE on June 4th2019, n°415959

The CE considers that for the application of bilateral tax treaties, the taxpayer’s tax residence is assessed on the date on which his income is generated (i.e. the date of exercise of the option).

Holding company: impact of a minority shareholding – Decision of the French Supreme Court (“CC”) on June 19th 2019, n°17-20.559 and 17-20.560

A company that has a main activity of operating subsidiaries in which it holds a majority shareholding does not lose its holding status for the purposes of ISF (but also for the purposes of the “Dutreil” agreement) if it also holds a minority shareholding in which it does not operate.

25% increase: the increase is constitutional – Decision of the CC n°2019-793 – QPC of June 28th 2019

The CC considers this mechanism in line with the French Constitution because it would pursue the objective of constitutional value of the fight against fraud and tax evasion and the resulting tax rate does not constitute an excessive charge in relation to the taxpayers’ ability to pay.

Bitcoins and other digital assets: the reporting obligations are specified – Decree 2019-656 of June 27th 2019

This decree specifies the reporting obligations for taxpayers making transfers of digital assets and for individuals, associations and companies not having the commercial form domiciled or established in France who hold digital asset accounts opened, held, used or closed in a foreign jurisdiction. This decree entered into force on June 29th 2019, except for the provisions relating to accounts opened, held, used or closed in foreign jurisdictions, which apply to returns filed on or after January 1st 2020.