The French government is expected, in coming days, to submit a draft of the Finance Bill for 2019.
Based on current understandings, the following corporate tax items could possibly be included in the draft bill.
France has obtained a derogation from the European Commission to allow France to postpone from 1 January 2019 to 1 January 2024, the implementation and transposition into French domestic law of the Anti-Tax Avoidance Directive (ATAD 1) provisions relating to interest deductions. However, it would appear that the implementation rules could be addressed by the 2019 Finance Bill (with a possible effective date of 1 January 2020).
French thin capitalization rules, as provided by Article 212-II of the French tax law, would be replaced by the ATAD 1 restriction (i.e., limiting the net financial expenses paid to both related and unrelated parties to 30% of the earnings before interest, tax, depreciation and amortization (EBITDA) if such expenses exceed €3 million).
Provisions under the currently taxpayer-favorable patent box regime would be restricted or made more stringent in order to comply with Action 5 of the base erosion and profit shifting (BEPS) project.
Tax professionals caution that while these items could be among the possible measures included the government’s tax proposals, they could be subject to amendments and changes during the legislative process as the bill is taken up by the Parliament.
In another matter, the prime minister clarified and confirmed that the individual (personal) income tax will be withheld on earnings and wages paid to individuals by their employers, effective 1 January 2019.
For more information, contact a tax professional with Fidal* in France or with the KPMG member firm in France:
Olivier Ferrari | +33 1 55 68 14 76 | email@example.com
Gilles Galinier-Warrain | +33 1 55 68 16 54 | firstname.lastname@example.org
Laurent Leclercq | +33 1 55 68 16 42 | email@example.com
Bruno Bacrot | +33 1 47 38 89 96 | firstname.lastname@example.org
Patrick Seroin | + 33 (0) 1 5568 4802 | email@example.com
* Fidal is a French law firm that is independent from KPMG and its member firms.
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