The French Parliament has adopted additional restrictions to the deductibility of finance costs if the French acquiring company is unable to demonstrate:
- That the decision relating to the shares are actually made by the acquiring company or a French related-party company; and
- Where control or influence over the company whose shares are held is exercised, that such control or influence is actually exercised by the company holding the shares or a French related-party company.
If this proof is not made, the finance costs would be disallowed pro rata to the ratio between the acquisition price of the shares and the amount of debt held by the company which has acquired the shares. The disallowance would apply for the year of the acquisition and for all subsequent fiscal years ending before the eighth anniversary of the acquisition.
This provision has a retroactive effect as it applies not only to acquisitions made on or after January 1 2012 but also those carried out previously, to the extent the disallowance period has not ended.
The provision raises several questions and, at least, requires reviewing the governance of existing and future French holding.
Sale of shares
Sales of shares (action) were subject to transfer duties of 3% calculated on the actual value of the securities, but capped at €5,000 ($6,400) per transfer. New rates have now been adopted applicable as from January 1 2012 with several exceptions:
- 3% for the portion of the value below €200,000;
- 0.5% for the portion of the value between €200,000 and €500 million; and
- 0.25% for the portion of value exceeding €500 million.
Emmanuel Picq (firstname.lastname@example.org) and Catherine Cassan (email@example.com)
Landwell & Associés, Paris
Tel: + 33 (0) 1 56 57 49 69 & + 33 (0) 1 56 57 41 49