French corporate tax legislation stipulates that distributions of profits from a subsidiary to a French parent company are not, in principle, taxed at the parent. Excluded from this, however, is a 5% proportion, which represents the charges incurred by the French parent company in connection with its holding in the subsidiary. These charges are not to be deductible because they serve the realisation of non-taxable income by the French parent company, namely the distribution of profits from its subsidiaries.
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The new guidance is not meant to reflect a substantial change to UK law, but the requirement that tax advice is ‘likely to be correct’ imposes unrealistic expectations
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