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Francois Hollande's government brings transfer pricing amendments to France

Francois Hollande's just-elected French government has proposed new measures to increase tax revenues, including changes to the transfer pricing regime.

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As new President Francois Hollande has a majority in parliament, the likelihood of the measures being passed is high and illustrates the government’s desire to strengthen the French Tax Administration’s authority on tax avoidance.

The changes target abusive corporate income tax strategies and state that the burden is on French companies, rather than the authorities, to demonstrate that any subsidiaries in tax havens have real substance and do not merely exist to avoid tax..

Companies can no longer deduct payments to subsidiaries, particularly those overseas, from their taxable profits if the objective of the subsidy is only financial (in that it is only for tax purposes).

Taxpayers that reduce their operations in France through cuts in production, closing sites, reducing profits or reducing assets cannot carry forward tax losses.

Any company that is part of a merger or takeover will no longer be allowed to transfer losses to other companies in the group unless the same level of production and employment is maintained.



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