|
This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
 Loss carry over
Loss carry back
SME-Use of foreign losses
 Loss carry over
As of January 1st, 2004, all existing and new tax losses can be carried forward indefinitely. Losses derived from depreciation allowance booked and deemed deferred during a loss year no longer exist.
Long term capital losses are carried forward 10 years.
Until December 31, 2003, losses can be carried over for 5 years only e.g. FY 2003 losses can be carried forward until FY 2008. Losses derived from depreciation allowance booked and deemed deferred during a loss year did not expire.
Loss carry back
Upon election, a loss can be carried back 3 years e.g. FY 2003 losses can be carried back until FY 2000.
Case law:
The Administrative Court of Appeal of Paris ruled that the starting point of the 3 years period for the carry-back of losses is the year in which the losses arose and not the year in which the option for the carry-back is made as requested by the French tax authorities.
The French Supreme Tax Court (CE 4-8-2006 n° 285201) ruled that the starting point of the 3 years period for the carry-back is the year in which the losses arose and not the year in which the option for the carry-back is made (e.g. in 2006, a company may carry-back 2004 losses on year 2001, 2002 and 2003).
Accordingly the French Supreme Administrative Court held that the starting point of the 5 years period after which the "carry-back" receivable is reimbursed is the year in which the losses arose and not the year in which the option is made.
French Supreme Administrative Court also ruled that the election may only apply to part of the NOL's, the balance remaining available for a carry-forward.
The carry back tax credit equal to the offset losses multiplied by the standard corporate tax rate can be used to pay the corporate tax. The tax credit cannot be used to pay the additional contributions. Should the tax credit remains unused within a 5-year period, it is refundable.
In case of judicially supervised reorganization or liquidation, enterprises may claim the refund of their unused tax losses carry-back receivable unused at the date of the judgment deciding the beginning of the reorganization or of the liquidation.
The election must be filed with the company income tax return. The loss carry-back system is only available for enterprises subject to corporate tax.
Losses carried forward are available only to the same enterprise continuing the same activity. Any substantial change in the activity and/or tax regime can jeopardize the losses carryovers.
French Supreme Court stated that a French company which maintains or develops its domestic activity through a business relationship with a foreign branch is allowed to deduct from its taxable result the losses or the reserve regularly booked generated by the related subsidies provided to this branch (CE May 16, 2003 Société Télécoise # 222956).
SME –Use of foreign losses
SMEs have the right to deduct from their French taxable result the losses from their 95% owned foreign establishments or subsidiaries established in EU or in tax treaty countries accepting administrative assistance and submit to a tax similar to the French CIT.
SME which headcount does not exceed 2000 and which are not more than 25% controlled by one or more companies which headcount exceed 2000.
Deduction of foreign losses from French taxable result is temporary. Deducted losses must be added back to the French taxable result up to the profit of the foreign subsidiaries or establishment, or when not sufficient, not later than the 5th fiscal year following the deduction.
This tax incentive is subject to EU de minis rules (Temporarily increased to 500 000€).
Come into force: Fiscal Year as of January 1st, 2009.
|
Close
