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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.
 French companies subject to corporate income tax may, subject to a prior ruling, tax consolidate their taxable result in France with the taxable result of their foreign subsidiaries and permanent establishment. The perimeter is agreed each year with the French tax authorities.
Most of the time, this perimeter includes foreign subsidiaries and permanent establishment controlled directly or indirectly by the "French tax consolidating company".
A foreign company is deemed to be controlled by the mother company holds at least 50% of the share capital of a subsidiary. The French subsidiaries are consolidated with the taxable result of the "worldwide tax consolidating company" according the French tax consolidation rules.
The taxable result of each foreign subsidiaries belonging to the perimeter of worldwide tax consolidation is adjusted according French tax rules. The pro rata share of the result is then consolidate according to mechanisms similar to the one used for accounting consolidation (elimination of interco transactions).
The worldwide taxable result is taxed in France according to French corporate tax rules. In order to avoid/mitigate double taxations, the foreign corporate tax paid by the foreign subsidiaries and/or permanent establishments is deducted from the French corporate tax paid by the "worldwide tax consolidating company". The use of foreign tax credits is subject to country per country limitations and global limitations. The worldwide tax consolidation might be favorable in 2 circumstances:
A worldwide tax consolidated group is profitable in France while making loss abroad.
As "Avoir fiscal" and "Precompte" are abolished as of January 1st, 2005, benefits related to the "precompte" no longer apply.
The implementation and administration of the worldwide tax consolidation regime is quite costly and the management of the effective tax rate of the group is very sophisticated. Therefore, the decision to implement such a regime requires an in-depth analysis.
The ruling necessary to implement the worldwide tax consolidation is obtained for a 5-year period without possibility to exit the regime during this period.
IMPORTANT: US Dual Consolidated Loss “DCL” rules are intended to prevent US members of a corporate group from offsetting US income with losses of dual resident members of the group when the losses may also be used to offset income of a foreign corporation under foreign law.
If unaddressed, French company benefiting of the Worldwide Tax Consolidation “WTC” regime may face significant US tax exposure when they use tax losses from their US subsidiaries belonging both to a US tax consolidation and to a French WTC regime.
Treasury department and IRS have recently issued proposed regulations addressing, among other issues, the treatment of dual consolidated losses (DCL) when the use of DCLs is either unduly restricted or allowed in unintended cases.
The regulations are proposed to be effective for DCLs incurred in taxable years beginning after the date that the regulations are issued in final form.
French companies benefiting from the WTC should take this opportunity to develop the appropriate tax plan allowing them to continue to use the losses of their US subsidiaries without facing a US tax exposure.
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