Tax newsletter – january 2021

Tax newsletter – january 2021


• Provisions for major maintenance: the exact maintenance agenda is no longer always required – Ministerial Answer GRAU published in the Official Journal (“JO”) of the French Parliament on December 22nd, 2020, No.283370

The Ministry for Economy and Finance states that a tax-free provision for major maintenance may be booked when the degree of deterioration or depreciation of the fixed asset at the end of the fiscal year makes the maintenance necessary, which can be estimated with sufficient approximation, performed within a reasonable period of time.


• Covid-19: waiver of rent in favour of companies are once again encouraged – Finance Bill for 2021, No. 2020-1721 on December 29th, 2020, section 20

Lessors who renounce to collect, before year 2021’s end, the rents due for November 2020 by companies which are the most affected by the consequences of the Covid-19’ crisis may benefit from a tax credit. Other measures already provided for lessors are also extended.


• Intragroup loans: the French Tax Authorities (“FTA”) release eight guidelines to help companies justifying the rate applied between related entities – Update of the impô website on February 5th, 2021

These guidelines outline best practices and the way to demonstrate that interest rates charged between related companies are market rates. The FTA emphasize that these guidelines, which are not exhaustive, are intended to be applied in ongoing tax audits and proceedings and must be considered as a whole.



• French tax authorities’ guidelines: a guideline regarding a tax collection notice («’ AMR ») is unenforceable against the FTA – Decision of the 3rd and 8th chambers of the French Administrative Supreme Court (“CE”) on December 11th, 2020, No. 421084, SA BNP Paribas

The CE judges that a guideline relating to information to be included in an AMR, which is part of the tax assessment procedure, cannot be enforced against the FTA since Section L 80 A of the French Tax Procedures Code only applies to guidelines relating to tax basis or tax or penalties’ collection.


• ESSOC Law: the Tax Compliance Audit (“TCA”) is launched – Decree No. 2021-25 and Ministerial Order CCPE2035569A on January 13th, 2021

Announced in 2018 as part of the Law for a State at the service of a trustworthy society (known as the “Essoc Law”), the TCA enables companies to benefit from a contractual service that strengthens their legal and tax security by auditing and approving their application of certain tax rules. The TCA applies to fiscal years ending on or after December 31st, 2020 and is open to all individuals or legal entities engaged in a business, either individually or as a company, regardless of their tax regime and turnover.


• France and Brazil Tax treaty: France may also tax capital gains on Brazilian real estate – Decision of the 3rd and 8th chambers of the CE on December 11th, 2020, No. 440307

The CE considers that France may tax capital gains generated from the sale of shares or similar rights in a company whose assets consist mainly of real estate located in Brazil – State which is entitled to tax these gains, according to Section 13, paragraph 1 of the Franco-Brazilian Tax Treaty – insofar as Section 22 of this Tax Treaty grants a tax credit corresponding to the amount of tax levied in Brazil up to the amount of French tax relating to such gains.


• Cross borders workers: remunerations for overtime worked in excess of 1,840 hours per year are exempted from personal income tax – Ministerial Answer Reitzel published in the JO of the French Parliament on December 22nd, 2020, No.30208

The Ministry for Action and Public Accounts states that cross-border workers may benefit from an income tax exemption for overtime salaries provided for French workers with respect to the hours they worked (since January 1st, 2019) in excess of the legal working hours in accordance with the legislation on working hours in the State where they carry out their salaried activity or, failing that, by a professional or interprofessional agreement or convention.



• Transfer duties: movable deemed real estate are excluded for the computation of the real estate ratio – Decision of the trade chamber of the French Supreme civil Court on December 2nd, 2020, No.18-25.559 FS-PR

The French Supreme civil Court considers that the technical installations of a hydroelectric power plant (turbine, cable and electrical cabinet), deemed to be a real estate, which are not expressly mentioned in Section 726, I-2 of the French Tax Code (“FTC”), should not be taken into consideration when determining the real estate ratio of a legal entity.


• Individuals’ capital gains on real estate: the transfer of a real estate property occurs on the date of signature of the provisional sale agreement – Decisions of the 9th and 10th chambers of the CE on December 29th, 2020, No. 428306, 428309, 428315-428402 and 428313-428404

In these four decisions, the CE considers that the transfer of property is deemed to have occurred on the date of signature of the provisional sale agreement and not at the time of the repetition of the sale in the notary’s presence for the computation of deduction for the duration of ownership (provided for in Section 150 VC of the FTC).


• Registration fees: the FTA publish a new version of the tax form No. 2705-A – Update of the website/particulier on January 15th, 2021

The tax form No. 2705-A allows the declaration of life insurance contract(s) on which premiums have been paid after the insured’s 70th birthday, an obligation provided for in Section 292 A of Appendix II to the FTC.


• “Blank” fiscal year: the FTA publish new information regarding the CIMR tax credit – Ministerial Answer of the Ministry for Public Accounts published in the JO of the French Parliament on January 26th, 2021, No.33962

Since December 1st, 2020, the CIMR tax credit can also be applied to non-exceptional income falling within the scope of the withholding tax, received or realized in 2018, by bona fide and first-time taxpayers who have filed their tax returns for the years 2016, 2017 and 2019 on time.