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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.
 Tax treaties presentation
Further information about selected tax treaties
Islamic Finance
 Tax treaties presentation
In France tax treaties are supersede the other provision of the French tax law. Tax treaties organize the elimination of double taxation and the right to tax between two countries As of January 1st, 2003, French tax treaties network covers 123 countries. It is one of the largest in the world.
Most treaties provide for mutual agreement procedure to try to solve double taxation issues arising between the 2 countries. The mutual agreement procedure must be introduced according specific formal obligations and time limits.
Treaty countries are not obliged to solve double taxation issues.
On March 29, 2007, the French tax authorities published the guideline 4-H-5-07 by which they now accept to look through the foreign partnerships to check whether non resident partners may benefit from the provision of a tax treaty with respect of French sourced dividends, interest and royalties. Conditions apply.
OECD = On November 14, 2005 the OECD released the complete version of the 6th edition of the Model Tax Convention with all the commentary, history of changes, non-member Countries position etc...
Further information about tax treaties
Kenya
Luxembourg
Denmark
Kenya
France and Kenya signed a tax treaty on December 4 th, 2007. The treaty generally follows the OCDE model convention.
Under this treaty, the maximum rates of withholding tax are 10% on dividends, 12% on interest and 10% on royalties. France and Kenya apply the ordinary credit method to avoid double taxation.
However some provisions of the tax treaty differ from OECD model. Partnerships are resident in the state where their place of effective management is located and all partners are personally subject to that state income tax. In addition United Nations model convention applies for construction project lasting more than 6 months and personal independent services.
Protocol allows France and Kenya to apply their thin capitalization rules.
The treaty is not yet in force.
Luxembourg
The new amendment to the tax treaty between France and Luxembourg provides that capital gains made on the sale estate located in France are taxable in France. But there is no provision on disposal of shares of Luxembourg companies holding French real estate. As treaty does not mention the French “preponderance immobilière”, the taxation of the shares of Luxembourg companies does not belong to France.
In addition, if the sale of the shares meets the conditions of the Luxembourg participation exemption regime, the capital gain on the sale of shares would be also tax exempt in Luxembourg.
Denmark
Since January 1st, 2009, the French-Danish tax treaty of February 8, 1957 no longer applies. Denmark denounced it in order to tax the pensions received by Danish citizens residing in France. This denunciation may generate double taxation issues for the Danish subsidiaries located in France, the French subsidiaries located in Denmark and individuals.
Main concerns are:
Dividends, interest and royalties not benefiting from the EU directives,
Taxation of seconded employees,
Taxation of real estate investments.
French tax authorities are drafting guidelines to eliminate the double taxations and maintain the administrative assistance between the two countries (Exchange of information and support for tax collection).
Islamic finance – Tax treatment
Attentive to provide legal and tax rules answering the needs of Islamic Finance players in France, Treasury department issued a serial of technical memos about the tax regime applicable to two finance products complying with Sharia :
Murabahah is a sale agreement by which a seller transfers a movable or immovable asset to an Islamic financier (Bank) who resales it to an investor for a forward payment (Sale by instalments).
Suluk (Bonds) are securities representing for their owner a receivable or a loan which remuneration and principal are linked to the performance of one or several assets owned by the issuer and which are assigned to the payment of the remuneration and the repayment of the Suluk or similar products.
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