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Reform allows horizontal tax consolidation


Following an EU Court decision, France has amended its rules on allowing horizontal tax consolidated groups. Taxand France summarises the main aspects of this new proposal.

A French tax group allows a parent company and its subsidiaries to compute and pay corporate income tax on the net profits of the group members. This regime only applies, in principle, if (i) the French parent company holds at least 95% of the shares of the subsidiaries either directly or indirectly, (ii) all the members of the group (including the parent company) are subject to French corporate income tax (“CIT”) (iii) they have the same fiscal year-end and (iv) no other company subject to French CIT holds more than 95% of the French parent company.

In practice, this regime allows, among other benefits, the losses of one group member to be immediately offset by the profits of the other group members and the neutralizations of most of intra-group transactions.

The new bill states that the set-up of a tax group between sister companies with their parent company established in another Member State or in a State of the EEA that has signed a Convention on Mutual Administrative Assistance with France would be authorised for fiscal year closed. Thus, one of the sister companies would be entitled to become the head of a French tax group.

Discover more: Upcoming tax group reform will allow horizontal tax consolidation

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The Finance Bill is still to be discussed by the French Parliament and final approval  should be expected by the end of 2014.

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