Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

France

France has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) except that France experienced some delays in exchanging information on future rulings (ToR II.5.6) and France did not identify or exchange information on new entrants to the IP regime or taxpayers benefitting from the third category of IP assets (ToR I.4.1.3). This latter recommendation was also included in the prior year peer review report. France is recommended to ensure that all information on future rulings is exchanged as soon as possible, to identify and exchange information on all new entrants to the IP regime, and to identify and exchange information on taxpayers benefitting from the third category of IP assets.

France can legally issue three types of rulings within the scope of the transparency framework.

In practice, France has issued 45 past rulings; for the period 1 April 2016 - 31 December 2016, France issued four future rulings; and for the year in review, France issued six future rulings within the scope of the transparency framework.

Peer input was received from one jurisdiction in respect of the exchanges of information on rulings received from France. The input was positive, noting that information was complete and in the correct format.

Introduction

415.  This peer review covers France’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR.

416.  Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

417.  France can legally issue the three following types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes;1 (ii) cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; and (iii) permanent establishment rulings. Rulings related to preferential regimes are issued by a specialised service in the legal department of the French tax administration. APAs are delivered by a specialised legal and economic expertise department in the legal department of the French tax administration.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

418.  For France, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

419.  In the prior year peer review report, it was determined that the French Tax Administration’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. The French Tax Administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

420.  For France, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

421.  In the prior year peer review report, it was determined that the French Tax Administration’s implementation of a new system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. The French Tax Administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

422.  In the prior year peer review report, it was determined that the French tax administration’s review and supervisions mechanisms were sufficient to meet the minimum standard. The French tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

423.  France has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

424.  France has the necessary domestic legal basis to exchange information spontaneously. France notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

425.  France is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 125 jurisdictions.2

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

426.  In the prior year peer review report, it was determined that the French Tax Administration’s completion and exchange of templates were sufficient to meet the minimum standard. Furthermore, France has confirmed that their approach to the completion of the summary section in section 7 of Annex C of the 2015 Action 5 Report (OECD, 2015) conforms with the internal FHTP suggested guidance to the section.

427.  The timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	45	0		These relate to the delayed exchanges reported in the prior year peer review report and were exchanged in early 2017.
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	0	3	Incorrect validation of records in the European Commission Central Directory.	Transmission occurred within 7 months of receipt by the Competent Authority.
Total	45	3

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

428.  France notes that during the prior year review, exchanges were performed with all relevant members of the Inclusive Framework and France has not identified any other past rulings to be additionally exchanged during the year in review.

429.  France notes that the reason for the delay in exchanging future rulings was due to an incorrect validation of records in the European Commission Central Directory. The exchanges were then transmitted within seven months of receipt by the Competent Authority, instead of within three months as required under the transparency framework. To address this issue, France has promoted training to staff to make them aware of the functioning of the European Commission Central Directory to avoid any further delays in the future. The result of this procedure will be assessed during the subsequent peer review process.

430.  Although six future rulings were issued, information was exchanged with respect to only three of these rulings as the other three were issued towards the end of 2017. France notes that information on these rulings was exchanged in early 2018 and within the timeframes set out in the transparency framework and this will be reviewed in the subsequent peer review.

Conclusion on section B

431.  France has the necessary legal framework and administrative process in place for exchanging information on rulings. France was not able to exchange all information on future rulings by the timelines set out in the transparency framework. France has met all of the ToR for the exchange of information process except with respect to delays in the timeliness of exchanges (ToR II.5.6). France is recommended to ensure that all information on future rulings is exchanged as soon as possible.

C. Statistics (ToR IV)

432.  The statistics for the 2017 review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	N/A	N/A
Cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	12	India, Ireland, Japan, Luxembourg, Spain, Switzerland, United Kingdom, United States
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	N/A	N/A
Permanent establishment rulings	36	Belgium, Bulgaria, Germany, Ireland, Italy, Lebanon, Luxembourg, Monaco, the Netherlands, Portugal, Spain, Switzerland, Tunisia, United Kingdom, United States.
Related party conduit rulings	N/A	N/A
De minimis rule	0	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	0
Total	48

D. Matters related to intellectual property regimes (ToR I.4.1.3)

433.  France offers an intellectual property regime (“IP regime”).3 During the prior year peer review, France did not identify or exchange information on new entrants to the IP regime or taxpayers benefitting from the third category of IP asset. France was recommended to put in place a mechanism to ensure that it can identify and exchange information on all new entrants to the IP regime as soon as possible, and to identify and exchange information on taxpayers benefitting from the third category of IP asset as soon as possible.

• New entrants benefitting from the grandfathered regime: as France has not amended its IP regime to conform to the Action 5 “nexus approach” and the regime is considered to be harmful, there is no grandfathering. However, France should have information available to it on new entrants after 6 February 2015 to the existing IP regime. France has not exchanged information on new entrants to the existing IP regime in 2016. This remains unchanged from the prior year peer review.

• Third category of IP assets: France’s IP regime provides benefits to income from patentable inventions, which appear to be a type of the “third category of IP asset” described in paragraph 37 of the Action 5 report (OECD, 2015). France has not implemented all of the requirements associated with this category of IP assets, thus the transparency requirements described in paragraph 37 would still apply to this case. France did not identify yet taxpayers benefitting from the third category of IP asset, and as such has not exchanged information on these taxpayers. This remains unchanged from the prior year peer review.

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable to this regime, which in 2017 did not comply with the nexus approach and has considered to be harmful.

434.  In the year of review, France did not undertake any improvements in relation to the identification or the exchange of information on new entrants to the IP regime or taxpayers benefitting from the third category of IP asset. As such, the recommendation has not been addressed and remains in place. France is recommended to identify and exchange information on all new entrants to the IP regime, and to identify and exchange information on taxpayers benefitting from the third category of IP assets.

435.  However, in 2018 France announced its intention to amend the IP regime by the end of 2018. France affirms that it will make the necessary changes together with the requirements of the transparency framework in respect of this regime.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
France has experienced delays in exchanging information on future rulings. This is a continuing recommendation from the prior year peer review.	France is recommended to ensure that all information on future rulings is exchanged as soon as possible
France did not identify or exchange information on new entrants to the IP regime or taxpayers benefitting from the third category of IP asset. This is a continuing recommendation from the prior year peer review.	France is recommended to identify and exchange information on all new entrants to the IP regime, and to identify and exchange information on taxpayers benefitting from the third category of IP assets.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  With respect to the following preferential regime: shipping regime.

← 2.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. France also has bilateral agreements in force with: Albania, Algeria, Andorra, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Benin, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cameroon, Canada, Central African Republic, Chile, China (People’s Republic of), Chinese Taipei, Congo, Côte d'Ivoire, Croatia, Cyprus, Czech Republic, Ecuador, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, French Polynesia, Gabon, Georgia, Germany, Ghana, Greece, Guinea, Hong Kong (China), Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Korea, Kosovo, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Madagascar, Malawi, Malaysia, Mali, Malta, Mauritania, Mauritius, Mexico, Monaco, Mongolia, Montenegro, Morocco, Namibia, Netherlands, New Caledonia, New Zealand, Niger, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, Portugal, Qatar, Quebec, Romania, Russia, Saudi Arabia, Senegal, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Saint Martin, Saint Pierre and Miquelon, Sweden, Switzerland, Syrian Arab Republic, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Viet Nam, Zambia and Zimbabwe.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

← 3.  This regime is the reduced rate for long term capital gains and profits from the licensing of IP rights.