Law & Numbers - News Tax

Tax news - September 2011

06.10.2011

Companies, Individuals, Tax audit and international news.

COMPANIES


1 - France - Partnership - Non Resident Partner

In an important decision, the French Supreme Court ruled that a non resident partner of a French partnership having its activity in France, is taxable in France on his profit share.

After having confirmed the taxation in France of such profits, The Supreme Court considered that the partner could not use the applicable tax treaty provisions to prevent this taxation, as the tax treaty did apply only on the profit made by the partnership itself but did not apply to the partner's profit share.

2 - France - CIT - The "Butterfly" effect

In a decision dated June 16th, 2011, the European commission considered that the tax consolidation regime in Netherlands breaches EU law.

In this regime, two sister companies established in Netherlands cannot form a fiscal unity when held by a parent established in another Member State. Should the Netherlands not follow this decision, the Commission can seize the European Court of Justice.

The French tax consolidation regime does not allow two sister companies held by a parent located in another Member State to form a fiscal unity.

Should the European procedure trigger a change in the tax consolidation regime, it could be timely for groups to claim the benefit of the tax consolidation for the past and the future.

In this respect, the change in the law further to the European Court of Justice decision "Société Papillon", and commented in administrative guidelines draft which was published for comments until September 5th, 2011, should be considered as a first step.

3 - France - Corporate Tax - Contribution of assets

In two decisions dated June 29th, 2011, the French Supreme Court ruled that assets contributions can be retroactive for tax purpose before the date where the receiving company was registered (Supreme Court June 29th, 2011 n° 317212 et n° 317234).

Fiscal retroactivity allows aggregating to the first financial year of the receiving company, the transactions as from the closing date of the financial year of the contributing company, even though these transactions occurred before the registration date of the receiving company.

4 - France - Contribution of a sole proprietorship

In a decision dated July 8th, 2011, the French Supreme Court judged that, with respect to the special regime of deferred taxation of capital gain (French Tax Code, art. 151 octies) applicable to a contribution of a sole proprietorship to a company occurred prior 2006, this special regime may apply even when the net value of the contributed assets include debts related to non contributed assets.

5 - France - Profit share Premium to employees

According to the social security law for 2011, companies of 50 employees or more must pay to their employees a profit share premium when the amount of dividends paid to the shareholders is higher than the average dividend paid the two previous financial years.

In groups where a group work council "comité de groupe" must be set up according to article 223-1 of the Labor Code, companies with more than 50 employees have to pay profit share premium only when the dividend distributed by the main company has increased compared to the two previous years.

These provisions are applicable to dividend distribution as from January 1st, 2011 and must be effective as of October 31st, 2011.


INDIVIDUALS

6 - France - Wealth tax - Non residents

Non resident individuals may be subject to wealth tax on their shares in a company owning real estate located in France : "SCI".


The new article 885 T ter of the French Tax Code (Finance Law dated July 29th, 2011 - art. 40) does no longer allow the deduction of shareholders's current account to calculate the net equity of such company.

This article aims at avoiding tax schemes which allowed non resident shareholders to minor the value of their shares by deducting their current account to get the net value while benefiting from a wealth tax exemption on these very same current accounts.

This provision will apply for the wealth tax due as of 2012.

7 - France - UK - Tax Treaty dated on June 19th, 2008 - Publication of the Guideline

The French Tax Administration published a Guideline dated on July 29th, 2011, regarding the new Tax Treaty between France and United Kingdom signed on June 19th, 2008.

Regarding the withholding tax, all incomes payed as from January 1st, 2010 will be eligible for the new Tax Treaty. Regarding the other income taxes, the new tax Treaty applies on incomes received during the tax year 2010.

8 - France - Tax audit - EVAFISC - The Supreme Administrative Court rejects the claim to prohibit the data base

In a decision dated August 24th 2011, the Supreme French Administrative Court rejects the claim of HSBC PRIVATE BANK (SWITZERLAND) SA to cancel the creation of the data base EVAFISC.

Created by a ministerial order dated November 25th, 2009, EVAFISC is a data base listing of all non disclosed foreign bank accounts held by French resident individuals or legal entities.

The purpose of this data base is to collect data on foreign bank accounts and to use it in order to prevent and sue violation of the criminal law and tax law. It is also aimed at inducing the owners of foreign bank accounts to disclose spontaneously these bank accounts.

9 - Portugal - CJCU - Failure of a Member State to fulfill obligations - Obligation to appoint a tax representative

In case C 267/09 of May 5th, 2011, Commission VS Portugal, action under Article 226 EC for failure to fulfill obligations, the CJUE condemned Portugal for adopting and maintaining in force Article 130 of the Personal Income Tax Code, which requires non residents to appoint a tax representative in Portugal should they receive income requiring the filling of a tax return. In doing such, Portugal has failed to fulfill its obligations under Article 56 EC.

This CJUE may impact some provisions of the French legislation, for example the provisions which include obligation for foreign legal entities to appoint a tax representative when selling a real estate in France.


TAX AUDIT

10 - France - Tax audit - EVAFISC - The Supreme Administrative Court rejects the claim to prohibit the data base

In a decision dated August 24th 2011, the Supreme French Administrative Court rejects the claim of HSBC PRIVATE BANK (Switzerland) SA to cancel the creation of the data base EVAFISC.

Created by a ministerial order dated November 25th, 2009, EVAFISC is a data base listing of all non disclosed foreign bank accounts held by French resident individuals or legal entities.

The purpose of this data base is to collect data on foreign bank accounts and to use it in order to prevent and sue violation of the criminal law and tax law. It is also aimed at inducing the owners of foreign bank accounts to disclose spontaneously these bank accounts.





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