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France Readies Tax Haven 'Black List'

by Ulrika Lomas,, Brussels

21 June 2013

As the French National Assembly begins its examination of the Government's anti-tax evasion bill, French Finance Minister Pierre Moscovici announced his intention to further add to the pressure on so-called "tax havens," or jurisdictions deemed uncooperative in tax matters.

Moscovici revealed plans to submit an amendment to the anti-tax evasion bill, providing that any countries that elect not to adopt an automatic exchange of information (AEI) in 2015 will be placed on France's "black list."

Defending his decision, the French Finance Minister emphasized that the automatic exchange of information is gradually becoming the international standard. Progress on the issue is being made at international, European, and national level, Moscovici stressed, welcoming the further advances made at the latest G8 meeting in Northern Ireland.

The threat of being placed on France's "black list," and the resulting penalties that would be incurred, will undoubtedly place additional pressure on those countries that have not as yet accepted AEI as the most efficient means with which to combat tax evasion, notably Switzerland and Luxembourg.

Progress has, however, been made. The Swiss Federal Council recently made clear that it is prepared "to cooperate actively" under the auspices of the OECD, on the development of a global standard. The Federal Council insisted that it would, "if such a standard materialises and if it is recognized and introduced by the G20 countries, OECD member countries and all major financial centers worldwide," incorporate the mechanism into Swiss law.

Luxembourg intends to apply from January 1, 2015, automatic exchange of information on savings income, on the basis of the European Savings Tax Directive currently in force. However, Luxembourg's Prime Minister Jean-Claude Juncker has made clear that it will only be "in the light of negotiations with third countries" that the Grand Duchy will decide to what extent the Directive could be enlarged.

Established in accordance with specific criteria, France's "black list" contains the names of those states failing to provide both fiscal transparency and administrative cooperation with France (ETNC). As a result, operators located in or realizing transactions with ETNC states will see more restrictive measures applied than under regular law.

If the subsidiaries of a parent company are based in a country appearing on the French Government's black list, they will, for example, no longer benefit from the parent-subsidiary regime providing that dividends, paid by a subsidiary to its parent company, are granted up to 95% exemption from corporate taxation.

Dividends, interest, and royalties paid to entities located in non-cooperative jurisdictions are also taxed unfavorably, at 55 percent.

In accordance with the provisions laid down under article 238-0 A of the General Tax Code, the list is revised and updated annually.

TAGS: compliance | Finance | tax | tax compliance | Ireland | tax avoidance | interest | royalties | law | corporation tax | Luxembourg | tax rates | France | Switzerland | dividends | G20 | penalties | individual income tax

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