Friday, 9 December 2016

France’s abolition of surtax exemption on tax-consolidated group distributions will not apply retroactively

The French government announced on 20 October 2016 that the termination of the exemption from the 3% surtax on distributions within tax-consolidated groups will not have retroactive effect. The announcement was made during discussions relating to the 2017 finance bill.
France’s constitutional court issued a decision on 30 September 2016, concluding that the exemption from the 3% surtax on distributions made within a tax-consolidated group does not comply with the equality principle in the French constitution and, therefore, is unconstitutional.
During the finance bill discussions, the Secretary of State for the Budget pointed out that the constitutional court gave the government until 1 January 2017 to come up with a remedy to the unconstitutional measure. The secretary confirmed that the proposed options for addressing the exemption for tax-consolidated groups would not have retroactive effect, and that the revisions would apply only to fiscal years starting as from 1 January 2017. The secretary reassured groups that the exception would continue to apply until the end of 2016.
The government is consulting with affected groups on measures to replace or amend the 3% surtax rules; a proposal is expected to be announced in mid-November 2016 during the discussions on the amended finance bill for 2016.

Source: Deloitte