FRANCE Law and Practice Contributed by: Anthony Roustan and Cédric Dubucq, Bruzzo Dubucq
National du Cinéma and applies regardless of where the provider is established.
• CFC rules, which tax French parent companies on the income of foreign subsidiaries in low-tax jurisdictions where the effective rate is below 60% of the French rate; • transfer pricing rules, which require arm’s length pricing with extensive documentation obligations (master file, local file, country-by-country report); • thin capitalisation rules, which limit related-party interest deduction through a 1.5:1 debt-to-equity ratio and a 30% EBITDA cap; • anti-hybrid mismatch rules, transposing the second Anti-Tax Avoidance Directive (ATAD2) and neutralis - ing deduction/no-inclusion and double deduction outcomes; and • exit taxation, imposing deferred tax on unrealised gains when taxpayers transfer their tax residence outside France. 5.3 Blacklists and Non-Cooperative Jurisdictions The French Blacklist France maintains a list of non-cooperative states and territories ( États et Territoires Non Coopératifs , or ETNC), which is updated annually by ministerial decree. Consequences Transactions with ETNC-listed jurisdictions face: • a 75% withholding rate on dividends, interest and royalties; and • non-deductibility of expenses, unless the taxpayer demonstrates a genuine business purpose. France also takes into account the EU blacklist of non- cooperative jurisdictions, which influences its own list - ing decisions. The combination of the ETNC list with CFC rules creates a powerful deterrent against the use of opaque jurisdictions. 5.4 Reporting Obligations and Disclosure Regimes Mandatory Reporting Frameworks France has implemented extensive reporting obliga - tions targeting cross-border arrangements and off - shore holdings:
5. Anti-Avoidance and Anti-Evasion Measures 5.1 Definition and Identification of Tax Fraud, Evasion, Tax Avoidance and Abusive Tax fraud is a criminal offence defined as intentional evasion of tax through fraudulent means. It carries up to five years’ imprisonment and EUR500,000 in fines. Abuse of Law Tax avoidance is primarily addressed through the abuse of law ( abus de droit ) procedure. The tradi - tional provision allows the tax authorities to disregard arrangements whose exclusive purpose is to obtain a tax advantage. France has two definitions of abuse of law: Schemes Tax Fraud • fictitious acts (eg, a gift disguised as a sale); and • tax abuse, defined as using a specific provision in a way that was not the purpose of the law-maker, with the exclusive purpose of getting a tax advan - tage. Abuse of law implies a penalty of up to 80% on the tax reassessment. Since 2019, a “minor abuse of law” ( mini abus de droit ) provision allows tax authorities to disregard arrange - ments whose principal (and not exclusive) purpose is tax-driven, significantly broadening the scope of the abuse of law. 5.2 Anti-Avoidance Mechanisms France has assembled a comprehensive anti-avoid - ance framework, combining domestic measures with transpositions of EU directives. The principal mecha - nisms are: • the abuse of law procedure, which allows the tax authorities to disregard transactions motivated exclusively or principally by tax benefits;
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