France Unveils 2009 Retroactive Finance Law

by Ulrika Lomas, Tax-News.com, Brussels

18 November 2009

French Budget Minister Eric Woerth and Finance Minister Christine Lagarde have unveiled details of the 2009 retroactive finance bill.

The bill contains key tax initiatives centered on four main areas:

Fiscal sanctions to penalize tax havens:

In accordance with the conclusions of the G20 summit meeting in Pittsburgh, any states or jurisdictions refusing to comply with the agreed international transparency requirements in tax matters will be subject to specific fiscal sanctions, targeting financial flows between these areas.

The finance bill therefore proposes the introduction of a number of fiscal sanctions: money paid into these states or jurisdictions will be taxed at 50%; a tax will be levied on dividends from these states; tougher rules will be imposed to combat the artificial localization of revenue in these states; corporate tax deductions will be limited for sums paid into these states; and companies will be required meticulously to document their transfer prices.

These measures would apply to any state or jurisdiction which, by the beginning of 2010, has not been removed from the Organization for Economic Cooperation and Development’s list, and has not signed an agreement with France on the exchange of tax information.

Measures to combat the underground economy:

To enable the immediate transfer of information between tax officials and the police service, the finance bill modifies existing rules pertaining to professional secrecy. It also enables the French tax authorities to control and to tax more efficiently illegal activities. Tax authorities would be able, for example, to tax illegal income, and to apply tougher penalties.

Initiatives to modernize French tax and customs administrations:

The finance bill aims to strengthen the guarantees offered to individuals by creating an adversarial process between the customs administration and operators. The bill also provides for the extension of remote declaration and payment to new businesses, to provide a more reliable and quicker service.

Measures to adapt French law to EU requirements:

The bill transposes European directives on excise duties, specifying that the sale of tobacco on the internet is to remain prohibited. It also amends the system of tax integration and patronage, and the taxation of property income from non-profit making organizations, taking into account recent European case law.

Finally, the bill also contains a measure extending the partial repayment of domestic consumption tax for farmers.

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