French Implementation of ATAD Rules

Susanne Wiener Susanne Wiener

On 24 September 2018, the French Government presented the Finance Bill draft for the year 2019. This draft will be discussed by the French Parliament over the next few weeks and may be subject to changes; the final version will be enacted before end of year, 2018.

Interest deduction limitation rules

Article 13 of the Finance Bill draft for 2019 transposes into French law the rules provided for in the “Anti-tax evasion” Directive (“ATAD”) adopted on 12 July 2016.

The following major changes to the current French interest deductibility limitation rules are planned:

These new rules would be applicable to financial years beginning on or after January 1, 2019.  Financial expenses incurred as from financial years beginning on or after that date would therefore be affected, including those relating to borrowings set up before that date.

Implementation of the general anti-abuse rule for corporate income tax

Article 48 of the Finance Bill draft introduces a general anti-abuse rule for corporate income tax. This clause provides that for the purpose of establishing corporation tax, no account shall be taken of an arrangement or series of arrangements which, having been put in place to obtain, as a main objective or under one of the main objectives, a tax advantage contrary to the object or purpose of the applicable tax law, are not authentic considering all the relevant facts and circumstances.

This new system aims to transpose into French domestic law the general anti-abuse rule provided for by the ATAD Directive and is in line with the wishes of the Member States to fight tax evasion both at EU and international level. Drafted in very general terms, this clause will allow the tax administration to challenge arrangements whose main objective is to obtain a tax advantage, in the context of an ordinary law procedure, without having to implement the abuse of rights procedure. Since the notion of “main objective” is also broader than the notion of “exclusively fiscal purpose”, this mechanism should be easier to implement by the tax administration.

This clause would apply to fiscal years beginning on or after January 1, 2019.


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