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12 December 2017 French Country-by-Country Reporting requirements may impact US multinational groups On 4 December 2017, the French Government published additional comments regarding the potential treatment of Country-by-Country (CbC) Reporting (CbCR) requirements of French subsidiaries and branches of foreign multinationals, where the country of residence of the foreign multinational has not yet signed the automatic exchange of information agreement with France. This is, for example, the case for US-based multinational enterprises that have to comply with CbCR requirements in France. Although the French Government, in this most recent publication, aims to provide increased comfort that no CbCR-related penalties would apply if certain conditions are met, its 4 December announcement still leaves room for interpretation and fails to provide the legal certainty sought after by French entities and their parent companies. The United States (US) has still not been included in the French ministerial order that contains the list of States considered as "compliant" for CbCR purposes (i.e., States which have introduced CbCR requirements and with which France has entered into an agreement allowing effective automatic exchange of CbC reports) and negotiations for a specific bilateral Competent Authority Agreement (CAA) on the Exchange of CbC reports between France and the US are still ongoing. Accordingly, the question may arise as to whether the French entities of a US group have to file a CbC report in France when the ultimate parent entity (UPE) of the group has voluntarily filed a CbC report in the US. In this respect, the OECD has issued guidelines encouraging the States in which local filing obligations exist for fiscal years starting from 1 January 2016 to adopt a "transitory rule" in order to relieve the entities established within their territory whose ultimate parent entity (UPE) is established in a State where CbCR filings are not yet mandatory from any CbCR filing requirements in the case where the UPE voluntary files a CbC report in its country of residence, subject to the following conditions:
Pursuant to the OECD recommendations, the French tax authorities released a statement on 4 December indicating that the French subsidiaries and branches of a foreign group whose UPE is not located in a State included in the above-mentioned ministerial order would be relieved from any CbCR filing requirements in France for a fiscal year starting from 1 January 2016 if the following conditions are met:
With respect to the situation of US groups, according to verbal information provided to us by the French tax authorities, the French tax authorities consider that the exchange of CbC reports between France and the US should be possible on the basis of the current France-US Tax Treaty which contains a provision for exchange of information. Moreover, both France and the US are still in negotiations, and so it may be possible that both countries could agree to an exchange mechanism under the existing treaty, other than on an automatic basis, once both sides are confident that all appropriate measures are in place, including, for example, data safeguards. As a consequence, assuming agreement is reached on a mechanism to share this information, it seems that the voluntary filing of a CbC report in the US should relieve the French entities of US groups from their obligation to file a CbC report in France for the fiscal year starting on 1 January 2016. In this regard, we understand that there may be an announcement forthcoming on this matter from the US. However, barring any further formal communications from either the French or US tax authorities, French subsidiaries or branches of US groups can only obtain legal certainty that France will not apply any penalties relating to CbC reporting requirement if at least one of the following steps are taken:
It should be noted that the first option would then still require the French subsidiary or branch to notify the name and the location of the SPE on its French tax return. Also, adoption of the second option would require the French subsidiary or branch of the US UPE to file a CbC report that complies with the relevant French standard as defined by law (i.e., Article 223 quinquies C of the French Tax Code).
Document ID: 2017-5023 |
