#SEPTEMBER 2017 – Tax law
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The partial recovery of the company value-added contribution (CVAC) paid in 2015, 2016 or even, if applicable, 2017
This may be possible given the challenge to the legal nature of how the CVAC for companies belonging to a tax- consolidated group is calculated, and in particular of Article 1594, I bis, which provides that when a company is member of a tax-consolidated group with a consolidated turnover greater than or equal to €7,630,000, the turnover to be taken into account when calculating its effective CVAE tax rate is the sum of the turnovers of each member company of the group, and in view of the decision of the Constitutional Council of May 19, 2017, no. 2017-629 PQC, FB Finance, which deemed that the distinction made by law between integrated and non-integrated companies constituted a breach of equality before the law.
Purpose of the contentious claim: the reimbursement of the difference between (i) the CVAC actually paid by each integrated company and (ii) the CVAC calculated on the basis of the turnover of each integrated company taken individually. A claim may be filed before December 31, 2017 for CVECs paid in 2015 and 2016. A claim may also be filed for tax that would have been paid in 2017, if applicable, if the decision of the Council was not taken into account for the liquidation of the 2017 CVAC.
Companies concerned: French companies that are members of a tax-consolidated group whose consolidated turnover (sum of turnovers of fiscally-integrated companies) is greater than or equal to €7,630,000.
Deadline for filing a claim: until December 31 of the 2nd year following the payment date of the CVAC. In order to avoid the limitation period, a contentious claim should be filed with the tax authorities as soon as possible.
Important stakes: yes.
Possible reimbursement of corporate tax through a carry forward mechanism applicable to non-offset foreign tax credits
The Constitutional Council was asked for a preliminary ruling on whether the rules for the deduction of withholding tax on investment income (mainly dividends and interest on bonds) complied with the law when the company cannot set off all of its withholding tax on corporate income tax payable in respect of the relevant revenue collection period. The fact that it is not possible to carry forward the non-offset withholding tax on the results of the following financial year may undermine the principles of equality before the law and the public offices as well as the right of ownership.
Purpose of the contentious claim: reimbursement of the portion of the corporate tax against which the withholding tax should have applied and which were paid to the Treasury in 2015 (if the claim is filed before 31/12/2017), 2016 or 2017.
Concerned companies: French companies that have received investment income from of non-European or European foreign subsidiaries that do not fall under the parent company/subsidiary regime subject to a withholding tax, that have not been able to make use of all of their available tax credits on the corporate income tax during the income tax year, and that did not carry forward the balance of tax credits not applied to the corporate tax paid for subsequent years. This also applies to parent companies of integrated groups in an identical situation, on account of income from foreign-source investment capital received by the tax group.
Deadline for filing a claim: until December 31 of the 2nd year following the date of payment of the corporate tax. In order to avoid the limitation period, a contentious claim should be filed with the tax authorities as soon as possible. Given the possibility of the Constitutional Council placing a time limit on the scope of its decision, claims should be filed before the decision is issued, likely before September 28, 2017 at the latest.
Important stakes: Withholding taxes can represent up to 15% of the investment income.
A claim could also be filed for tax credits relating to non-bond interests and royalties, but with a smaller likelihood of success, given that these revenues are not specifically targeted by the preliminary ruling.
Reminder – The 3% contribution on revenue distributed in 2015, 2016 and 2017 may be recovered
The legal nature of the 3% dividend contribution provided for in article 235 ter ZCA of the French Tax Code is debatable and has been challenged under the Constitution, European Union law and the European Convention on Human Rights. In our view, given the decision of the Council of State (July 7, 2017, Soparfi) to ask the Constitutional Council for a preliminary ruling on the constitutionality of the 3% contribution, the chances of success of contentious claims for the reimbursement of this contribution have increased in cases where the dividends have been distributed to legal persons. If the dividends were distributed to natural persons or legal entities that are not parent companies within the meaning of the European Council parent company/subsidiary directive, the chances of success appear to be lower, but the distributing company could nevertheless decide to file a claim as a precaution.
Purpose of the contentious claim: the full reimbursement of the 3% contribution on distributed income, if payment was made to the Treasury in 2015 (for claims filed before 31/12/2017), 2016 or 2017.
Companies and distributions concerned: French companies that have distributed dividends to other companies but have not been able to benefit either from the tax exemption applicable to tax consolidations or from the exemption provided for SMEs under the European definition of the term.
Deadline for filing a claim: until December 31 of the 2nd year following the date of payment of the said contribution. Moreover, the forthcoming decision of the Constitutional Council could place a time limit on the effects of its possible decision to censure. We therefore recommend that a contentious claim be filed with the tax authorities as soon as possible, and before the forthcoming decision of the Constitutional Council (which will be issued no later than October 7, 2017).