To all friends investing in France. Very Important: This has tax implications on investments/ real estate relating to France. The French Government on 28 August 2013 published a Ministerial Decree updating the list of non-cooperative states or territories (NCSTs). The concept of non-cooperative states or territories (hereafter “NCSTs”) has been defined under French law for the first time in February 2010 and includes jurisdictions not satisfying the OECD exchange of tax information standards. As a result, a first list of NCSTs was produced on 12 February 2010 which has been amended every year since then (i.e. in 2011, in 2012 and now in 2013). The list NCSTs is commonly known as the French “black list”. REMINDER – THE CONCEPT OF NON-COOPERATIVE STATES OR TERRITORIES (NCSTS) A country is included in the list of non-cooperative country or territory if one of the following conditions is met: This country has not entered into a mutual administrative assistance treaty with France despite its request. This country has entered into a mutual administrative assistance treaty with France but France considers that this treaty is not applied properly. Transactions involving NCSTs are subject to higher than standard withholding tax rates, stronger anti avoidance or disclosure rules and denial of certain exemption regimes (as detailed below). The 2011 NCSTs list is: Anguilla, Belize, Brunei, Costa Rica, Dominique, Grenade, Guatemala, Cook Islands, Marshall Islands, Turks and Caikos, Liberia, Montserrat, Nauru, Niue, Oman, Philippines, Saint Vincent et les Grenadines. The 2012 NCSTs list is: Botswana, Brunei, Guatemala, Marshall Islands, Montserrat, Nauru, Niue, Philippines were added. __________ THE 2013 UPDATE The list of non-cooperative country or territory is now the following: Botswana, Brunei, Guatemala, Marshall Islands, Montserrat, Nauru, Niue, Jersey, the British Virgin Islands, Bermuda. Jersey, Bermuda and the British Virgin Islands have been added to the French black list while Philippines has been removed. Established in accordance with specific criteria, the list contains those states failing to provide both fiscal transparency and administrative cooperation with France. As a result, operators located in or realizing transactions with NCSTs will see more restrictive measures applied than under regular law. The inclusion of Bermuda, Jersey and the BVI on the black list effective January 2013 will affect transactions made with entities in these territories beginning January 2014. THE TAX CONSEQUENCES RELATED TO THE INCLUSION OF A COUNTRY IN THIS LIST Transactions with non-cooperative states or territories will be subject to an adverse tax regime: French companies having some relations with entities of these countries The ownership of a NCST company by a French company may lead to adverse tax consequences. Please find below a selection of that detrimental impact: Dividends distributed by the NCST company will not benefit from the participation-exemption regime (i.e. dividends will be subject to corporate income tax at the standard rate. Capital gains realized by the French company in case of disposal of the NCST company will not benefit from the participation-exemption regime i.e. the capital gain will be subject to corporate income tax at the standard rate. The capital gain arising from the disposal by a NCST company of French shares will be subject to tax at the rate of 75% irrespective of the percentage shareholding. Payments made by a French company to a NCCT entity Royalties paid and dividends or interest distributed by a French company to a non-cooperative state or territory tax resident will be subject to a 75% withholding tax. Specific transfer pricing documentation for transactions made between the French company and the NCCT company is required.Real estate French real estate capital gains made by companies or individuals established or resident in an non cooperative state or territory will be subject to tax at the rate of 75% (vs. 19% or 33.33%). The NCST company owning directly or indirectly a real estate asset should not benefit from the 3% tax exemption even if all the required information are disclosed to the French tax authorities. Trusts Gifts or transfers made by the settlor will be subject to a 60% tax rate irrespective of the link between the settlor and the beneficiaries in case the trustee is established or resident in a non-cooperative state or territory. The inclusion of Jersey, Bermuda and the British Virgin Islands are designed to discourage taxpayers from continuing to make transactions with these states. This new tax regime will be applicable as from January 1, 2014. As a conclusion, consideration should be given to restructure existing schemes located in NCSTs by the end of the year in order to avoid any adverse impact of the French rules as from January 1, 2014. (This information has been brought to us by Mr .KHAN Imran with UBP)
Posted on: Wed, 27 Nov 2013 11:17:20 +0000
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