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Exceptional contribution on French corporate tax | Tax Connect Flash

20/11/2015

Exceptional contribution on French corporate tax: Reminder for permanent establishments of foreign companies that paid the contribution to file a claim before 31 December 2015
In France, taxpayers may in principle file a claim at the latest on the 31 December of the second year following the tax payment in order to obtain a refund for the excess tax paid.

Pursuant to Article 235 ter ZAA of the French Tax Code (“FTC”), companies subject to corporate tax whose annual turnover exceed 250 million euros are liable to an exceptional contribution amounting to 10.7% of their corporate tax liability (for financial years ending between 31 December 2011 and 30 December 2013, the rate was of 5%). This contribution is legally distinct from corporate tax to the extent that it increases the amount of corporate tax due by companies. Temporarily applicable - as provided by legislation currently in force - to financial years ended until 30 December 2016 included, this contribution could represent a significant cost for companies falling within its scope.

A German company with a permanent establishment ("PE") in France has been considered by the French Tax Authority (“FTA”) as liable to the contribution on corporate tax. Thus, the German company filed a claim to get a refund of the contribution paid asserting that the turnover of the French PE did not exceed the 250 million euros threshold.

In accordance with its position expressed in a statement of practice (see BOI-IS-AUT-20 n° 100, version of 3 September 2014), the FTA rejected the claim arguing that the company’s overall turnover, taking into account the turnover resulting from business carried out by the German company outside of France and not attributable to its French PE, exceeded the threshold. According to the FTA, the turnover condition intends to reflect the actual size of the company. That is why the FTA considered that the threshold had to be computed on the aggregated turnover of the German company and its French PE, even though it partly includes profits arising from business carried out outside of France that are not within the scope of the French corporate tax based on territoriality.

Contrary to FTA’s position, the administrative court of appeal of Versailles ruled that the threshold has to be appreciated by solely taking into account the turnover attributable to the French PE (see the judgment dated 15 October 2015, n° 14VE00129).The administrative court of appeal ruled that the threshold must be determined on the sole turnover related to profits subject to corporate tax in France, pursuant to Article 209 of the FTC (stating that corporate tax is only applicable to “profits made by enterprise operated in France”).

Exceptional contribution on French corporate tax: Reminder for permanent establishments of foreign companies that paid the contribution to file a claim before 31 December 2015
In France, taxpayers may in principle file a claim at the latest on the 31 December of the second year following the tax payment in order to obtain a refund for the excess tax paid.

Pursuant to Article 235 ter ZAA of the French Tax Code (“FTC”), companies subject to corporate tax whose annual turnover exceed 250 million euros are liable to an exceptional contribution amounting to 10.7% of their corporate tax liability (for financial years ending between 31 December 2011 and 30 December 2013, the rate was of 5%). This contribution is legally distinct from corporate tax to the extent that it increases the amount of corporate tax due by companies. Temporarily applicable - as provided by legislation currently in force - to financial years ended until 30 December 2016 included, this contribution could represent a significant cost for companies falling within its scope.

A German company with a permanent establishment ("PE") in France has been considered by the French Tax Authority (“FTA”) as liable to the contribution on corporate tax. Thus, the German company filed a claim to get a refund of the contribution paid asserting that the turnover of the French PE did not exceed the 250 million euros threshold.

In accordance with its position expressed in a statement of practice (see BOI-IS-AUT-20 n° 100, version of 3 September 2014), the FTA rejected the claim arguing that the company’s overall turnover, taking into account the turnover resulting from business carried out by the German company outside of France and not attributable to its French PE, exceeded the threshold. According to the FTA, the turnover condition intends to reflect the actual size of the company. That is why the FTA considered that the threshold had to be computed on the aggregated turnover of the German company and its French PE, even though it partly includes profits arising from business carried out outside of France that are not within the scope of the French corporate tax based on territoriality.

Contrary to FTA’s position, the administrative court of appeal of Versailles ruled that the threshold has to be appreciated by solely taking into account the turnover attributable to the French PE (see the judgment dated 15 October 2015, n° 14VE00129).The administrative court of appeal ruled that the threshold must be determined on the sole turnover related to profits subject to corporate tax in France, pursuant to Article 209 of the FTC (stating that corporate tax is only applicable to “profits made by enterprise operated in France”).