Luxembourg
- Simplified and accelerated assessment process for corporate
tax purposes
On
29 January 2010, the Luxembourg tax authorities announced
that the new assessment process will be applicable as from
1 February 2010.
The new
procedure (introduced by law in December 2008) aims at reducing
the lapse of time between filing and assessment. Accordingly,
the tax authorities will be entitled to issue a tax assessment
notice based on the tax return filed without a further detailed
analysis of the figures declared.
The above
is in a first step only applicable for companies with share
capital (S.à r.l., SA, SCA and SE).
A tax
assessment issued according to the new procedure will become
final after 5 years. The Luxembourg tax authorities have however
the possibility to re-assess the company based on a more thorough
verification within the legal statute of limitations of 5
years.
France
- French
transfer tax levied on transfers of shares held in foreign
companies predominantly holding French real estate assets
- New territoriality rules
The
corrective 2009 Finance Act introduced new provisions to the
French tax code (Code Général des Impôts)
that impose a 5% transfer tax on a transfer of shares held
in foreign companies whose assets principally consist of French
immovable property (real estate).
Overview
Different
rates of French transfer tax apply with respect to the transfer
or sale of shares:
-
Transfers
of shares held in SARL, SNC and SCI (which does not qualify
as a real estate company) are subject to a 3% tax. The
tax base is reduced by a rebate, for each share, using
the following ratio: Total number of shares divided by
€23,000. The disposal of shares in a SCI (normally
considered as a real estate company) is however subject
to the 5% transfer tax.
- Transfers
of shares held in SAS or SA that are not listed on a stock
exchange are subject to the 3% tax, but with a cap of €5,000
per transfer.
- Transactions
involving shares listed on a stock exchange are not subject
to transfer tax if no written transfer document (deed) is
drawn up.
When
a non-listed company is considered to be a real estate entity
- i.e., a company whose assets (held directly or indirectly)
are or were during the year before the share transfer mainly
comprised of French immovable property, such share transfers
are subject to a transfer tax imposed at a rate of 5% (without
any rebate or cap) based on the sale price of the shares or
their fair market value, if higher.
French
Territoriality Rules
As a general
rule, a share transfer is subject to French transfer tax if
it relates to: (1) shares held in a French non-listed company,
or (2) shares held in a foreign company when such transfer
results in a written deed being prepared in France.
Transfers
of Shares of Foreign Companies Predominantly Holding French
Real Estate Assets
In the
past, the French tax authorities considered that the transfer
of shares held in foreign companies predominantly holding
French real estate assets was subject to French transfer tax
(even if a written deed was drawn up abroad). The French courts,
however, did not share this view and instead held that the
transfer of a foreign company’s shares, by means of a
written deed drawn up abroad (not in France), was not subject
to the French transfer tax.
See decisions
of the Nice court (TGI Nice), N° 05-1327 (27 September
2007), of the Grasse court (TGI Grasse), N° 07-3711 (4
September 2008); and of the Aix en Provence Court of Appeal,
N° 2009-672 (19 November 2009).
To clarify
and clearly establish territoriality rules (and, consequently,
put an end to the series of French case law that rejected
the tax authorities’ position), the corrective 2009 Finance
Act provides for the application of the 5% transfer tax on
transfers of shares of non-listed foreign real estate companies
even if a written deed is drawn up abroad.
Under
this new provision - effective 1 January 2010 - the
uncapped 5% French transfer tax burden may be offset by a
tax credit equal to the amount of potential transfer taxes
effectively paid in the country or state of each company involved
in the transaction, in accordance with the provisions of that
country or state and under the framework of a compulsory transfer
tax formality. However, the amount of this tax credit cannot
exceed the amount of the French transfer tax paid in connection
to the share transfer.
KPMG
Luxembourg comments
The implementation
of this law however raises the question of its practical and
legitimate application when the vendor and the purchaser are
not French tax resident.
Please
feel free to contact us to discuss the impact those new rules
could have on your current French property structure.
The
information contained herein is of a general nature and is
not intended to address the circumstances of any particular
individual or entity. Although we endeavour to provide accurate
and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that
it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice
after a thorough examination of the particular situation.
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