Vivendi To Save Billions In Tax By Switch To New Tax Regime

by Ulrika Lomas, Tax-News.com, Brussels

30 August 2004

French telecoms and media group Vivendi Universal has received permission from the government to use an alternative tax regime that will save it roughly €3.8 billion in the years ahead, according to reports.

Known as the consolidated global profits tax system, the new tax status will allow the company to substantially reduce future tax bills through credits for roughly €11 billion in past operating losses made by its SFR-Cegetel telecommunications unit.

In return for the switch, Vivendi has agreed to help create at least 1,600 permanent new jobs in France within three years, rising to 2,100 in five years, the French Finance Ministry revealed in a statement.

However, the move has attracted the attention of the European Commission, which announced last week that it will study the Vivendi case to verify that the firm has not received preferential treatment from the government.

According to EU spokesman Tilman Lueder, the 1965 law under which Vivendi was allowed to change its tax regime did not in principle infringe European regulations so long as it is open to exploitation by all firms.

"Providing the tax breaks are available to all French multinationals there is no problem," Lueder told reporters.

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