20 Mar Tax newsletter February 2020
I. CORPORATE TAXATION
• Tax group: a parent company whose own taxable incomes are reassessed may benefit from the special reclaim time limit – Decisions of the Versailles Administrative Court of Appeal (“CAA”) on December 3rd, 2019, n°18VE00849, Société Vicat and on November 19th, 2019, n° 18VE01276, Société Accor
The CAA of Versailles considers that, when a claim relates to the parent company’s taxable income, the special time limit provided for in Article R 196-3 of the Tax Procedures Code (“LPF”) may be applied. The CAA of Versailles states that the general time limit only relates to additional taxes applied in the reassessment procedure. Appeals in cassation have been lodged against these two decisions.
• Digital Services Tax (“GAFA Tax”): the payment for 2020 can be delayed – Communication of the French tax authorities (« FTA ») on February 10th, 2020
The FTA announce that companies liable for the GAFA tax may defer the payment of installments for 2020 – normally scheduled on April and October 2020 – to December 2020.
II. TAX AUDIT
• Tax audit: the tax reassessment notice must be sent to the French tax representative of a non- resident taxpayer – Decision of the Versailles CAA on December 17th, 2019, n° 17VE02360
The CAA of Versailles considers that a letter sent spontaneously to the FTA by a taxpayer transferring his tax residency abroad and designating a tax representative in France, is equivalent to a proxy. Therefore, the FTA have to notify any tax reassessment to the said representative, even if the letter was sent to the FTA before the reassessment procedure was initiated.
• Relationship between the FTA and taxpayers: a taxpayer can ask for a paper copy under certain conditions – Decision of the 9th and 10th chambers of the French Administrative Supreme Court (« CE ») on January 30th, 2020, n° 418797, Société Cutting Tools Management Service
The CE considers that a company holding a professional account on the “impots.gouv.fr” website cannot ask the FTA to provide paper copies of the files accessible on its personal space.
III. INTERNATIONAL TAXATION
• France and Switzerland Tax treaty: first transfer of a real estate other than the main residence – Decision of the 9th and 10th chambers of the CE on February 12th, 2020, n°415475
The CE considers that a Swiss resident may benefit from the exemption for the first transfer of a real estate other than his main residence if the conditions are fulfilled. Indeed, the Franco-Swiss tax treaty provides that capital gains on real estate are subject to tax under the same conditions, whether the beneficiary is a tax resident of France or Switzerland.
• France and US Tax treaty: publication of new comments from the FTA on February 19th, 2020 – BOI-INT-CVB-USA-10
The administrative guidelines take into account the position of the Internal Revenue Services (IRS) that CSG and CRDS must be considered for the computation of the tax credit deductible from U.S. income tax granted to U.S. residents receiving French source incomes, as well as to residents of France subject to U.S. tax because of their U.S. citizenship.
• Exchange of information: update of the French administrative guidelines relating to the financial accounts reporting on February 26th, 2020 – BOI-CF-INF-10-40-80
FTA provide details on compliance with the rules applicable to financial institutions and holders of financial accounts, as well as penalties in case of non-compliance.
• Multilateral Instrument: the list of signatories is updated – OECD comments on February 28th, 2020
The latest update of the list of signatories and parties to the Multilateral Instrument, amounting to 94, was published on February 28th, 2020. This update indicates the jurisdictions which have expressed their intention to become signatories: Algeria, Eswatini, Lebanon and Thailand.
IV. INDIVIDUAL TAXATION
• Deemed distributions: the presumption of distribution does not apply to negative reduction of inventory which did not entail any disinvestment – Decisions of the 3rd and 8th chambers of the CE on December 19th, 2019, n° 429309, SARL Socoprim et n° 429310
The CE considers that a profit cannot be regarded as distributed for the sole reason that it results from the reassessment into the company’s income of unrecognised income and unjustified expenses, while it also results from a reduction (negative variation) of inventories which did not entail any disinvestment.
• Income from moveable property: publication by French tax authorities on December 20th, 2019 of their comments on the “Flat tax” – BOI-RPPM-RCM
FTA publish their comments on the “flat-tax” (“PFU”) introduced by the Finance Act for 2018.
• Shareholders’ current accounts: only the positive variation in the balance over the year may be taxed – Decision of the 3rd and 8th chambers of the CE on December 27th, 2019, n° 420478
The CE considers that in case of variation in the debit balance of the shareholder’s current account from one calendar year to the following, only the positive difference between the two balances can legally be included in the taxable income of the shareholder, partner or unitholder for the said year.
• Income tax: the tax treatment of a mixed compensatory allowance paid over a period of less than 12 months infringes the Constitution – Decision of the Constitutional Council (« CC ») on January 31st, 2020, n° 2019-824 QPC
The CC considers that Parliament cannot deprive the debtor of a mixed compensatory allowance from the tax reduction on capital payments made over less than 12 months on the sole ground that they are supplemented by an annuity.
• Income tax: publication of the guidelines on the CIMR on February 10th, 2020 – BOI-IR-PAS-50-10-30 and 50-20-50
The CIMR is attributed for 2018 income spontaneously declared by the taxpayer. The FTA, that can reassess its amount until 2022, announces that they will be comprehensive towards taxpayers who have in good faith failed to comply with their reporting obligations in 2019.
• Trusts: Reporting obligations of trustees are extended – Ministerial Order n°2020-115 on February 12th, 2020 strengthening the national anti-money laundering and anti-terrorist financing framework, article 13
This Ministerial order notably extends the reporting obligations of trustees who have a “business relationship” with France. Moreover, additional information must be provided (such as information about the Protector or any person exercising effective control over the Trust). We will wait for the Implementing Decree as well as the update of the tax forms n°2181 before June 15th, 2020.