France draft corrective finance bill for 2017 | KPMG Global
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France: Draft “corrective” finance bill for 2017

France draft tax legislation

The French government on 15 November 2017 released a draft “corrective” finance bill for 2017 that includes a certain number of tax technical measures.


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The following discussion provides a summary of certain proposals in the draft corrective finance bill for 2017.

Cross-border mergers

The Court of Justice of the European Union (CJEU) in a March 2017 judgment found that a French domestic tax provision requiring a prior tax ruling from the French tax authorities in advance of a cross-border merger (or similar transaction) in order for the taxpayer to benefit from the French tax deferral regime for mergers infringes the freedom of establishment principle under EU law as well as the EU merger directive.

As a consequence, the draft corrective finance bill for 2017 would repeal the requirement that the taxpayer obtain a pre-merger ruling and would add to French tax law, an anti-abuse clause similar to one already included in the EU merger directive.

Under the proposal, French contributing (or absorbed) companies would have to file with the French tax authorities, a declaration including certain basic information regarding the specifics of and reasons for the merger or transaction. Furthermore, the requirement that taxpayers must keep those shares received in exchange of a partial contribution of assets, or shares received from a spin-off, for a minimum of three years would be repealed.

Companies involved in a cross-border merger, nevertheless, may still request that the French tax authorities confirm, by a ruling, that the transaction satisfies the conditions required in order to claim the benefits under the special merger regime.

This new provision would apply to cross-border mergers or other corporate reorganization transactions taking place as from 1 January 2018.

Foreign tax credits

The draft corrective finance bill for 2017 includes a provision intended to address court decisions on taxpayer claims for foreign tax credits. The proposed provision would aim at prohibiting the deduction of foreign tax credits pursuant to provisions under income tax treaties to which France is a treaty partner. 

In most cases, tax treaties specify that certain foreign taxes can be claimed as a tax credit in France, when the right to tax is shared between the “country of source” and France. The treaties generally do not explicitly prohibit the deduction of these taxes when the credit cannot be offset by the French taxpayer (e.g., in instances of a tax loss position). Some tax treaties, however, specifically bar a deduction of foreign taxes. 

The proposed provision would harmonize the treatment of foreign taxes by generally prohibiting any deduction of foreign taxes levied pursuant to a tax treaty. Withholding taxes levied in violation of the provisions of a tax treaty would, however, remain deductible (as has been decided in the court decisions).

This new provision would apply to financial years closed as of 31 December 2017 and later.

Reduced rate of interest for late payments of tax

The rate of interest owed by a taxpayer for a late payment of taxes or with respect to tax reassessments would be reduced to 0.20% (instead of the current interest rate of 0.40%) per month.

The rate of interest paid to a taxpayer by the French tax authorities in instances when the taxpayer is successful with tax refund claims or reimbursements similarly would be reduced to 0.20% (instead of the current interest rate of 0.40%) per month.

This new rate of interest would apply to interest “running” as from 1 January 2018.

Measures addressing tax fraud and evasion

The draft corrective finance bill for 2017 includes measures concerning which entities would have control over the information that identifies persons and financial accounts for purposes of information to be exchanged and shared with foreign tax authorities under the common reporting standard (CRS) regime.

Control of taxpayer information (country of residence, tax identification number, etc.) would be the responsibility of the French market and banking supervisory authorities (AMF / ACPR).

In addition, the French tax authorities would automatically be informed when a taxpayer refuses to disclose to financial institutions such required information (country of residence, tax identification number).

Deferral of taxation of certain interim transactions

Certain “interim” corporate transactions (for example, the division or regrouping of shares) typically generate a taxable capital gain or loss. Under certain conditions, however, the French tax authorities currently allow a deferral of tax on these transactions.

To provide taxpayers with legal certainty about these transactions, this tax deferral measure would be codified and formally be made part of French tax law. 

Delayed effective date of PAYE withholding system

A French “pay as you earn” (PAYE) system—that is, a regime providing for contemporaneous withholding of tax on salaries or pensions by employers or pension schemes and for contemporaneous payment of income tax by taxpayers on other income—was included in the Finance Law for 2017 with an effective date of 1 January 2018. However, implementation of the PAYE system was delayed by one year with a government ordinance issued in September 2017.

The draft corrective finance bill for 2017 confirms that the new withholding tax system would apply beginning 1 January 2019—also the effective date of most of the provisions from the original legislation regarding the withholding tax regime’s scope and application rules.


For more information, contact a tax professional with Fidal* in France or with KPMG in the United States:

Gilles Galinier-Warrain | +33 1 55 68 16 54 | 

Patrick Seroin | +1 (212) 954-2523 |


* Fidal is a French law firm that is independent from KPMG and its member firms.

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