EU Commission Orders France To Abolish Tax Exemptions For Mutual And Provident Societies

by Ulrika Lomas, Tax-News.com, Brussels

04 March 2005

The European Commission has adopted a recommendation calling on France to abolish a tax exemption on insurance contracts enjoyed by mutual and provident societies in the case of non-health insurance risks.

In France, insurance contracts concluded by mutual societies governed by the code on mutual societies and provident societies are not subject to the tax on insurance contracts.

The Commission considers that this exemption constitutes state aid in that it confers an advantage on mutual and provident societies not enjoyed by other French and foreign insurance companies with which they are in competition.

However, the exemption also constitutes what is known as “existing aid” as it predates the entry into force of the Treaty of Rome. This means that in order for the exemption to be abolished, the cooperation of the French authorities is needed by the Commission.

Refusal by France to assist the Commission could result in the initiation of a formal investigation procedure by the EU.

Commenting on the matter, EU Competition Commissioner Neelie Kroes observed that “the recommendation is a further step towards the removal of distortions of competition in the EU insurance market.”

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