On December 4, 2017, France announced a transitional measure on CbC reporting. If a parent company located in a jurisdiction that does not have a CbC exchange agreement with France voluntarily submits a CbC report for a financial year beginning on January 1, 2016, and the CbC report is transmitted by the foreign tax authority to the French competent authority, then subsidiaries or branches located in France will not be required to submit a CbC report in France. See BEPS Action 13.
France codified its CbC reporting requirements in article 223 quinquies C of the Tax Code. Under this article, MNEs are required to prepare a CbC report with the group’s earnings, as well as information on the location and activity of constituent entities, if the MNE meets the following criteria:
- Established consolidated accounts.
- Holds or controls, directly or indirectly, one or more legal entities or branches established outside of France.
- Has an annual consolidated turnover before tax of at least €750M.
- Is not held by one or more legal entities located in France or established outside France that are required to file a CbC report under foreign law.
According to article 223 quinquies C of the Tax Code, French subsidiaries or branches of parent companies located in jurisdictions that do not require the submission of a CbC report or which have not concluded an agreement with France for the exchange of CbC reports, are required to file the CbC report if it was designated by the group to file; has informed the tax authorities; and cannot demonstrate that another group entity, located in France or in a jurisdiction that has a CbC exchange agreement with France, has been designated for this purpose.
On November 30, 2017, the OECD released updated guidance on CbC reporting. According to this guidance, jurisdictions that are unable to implement CbC reporting with respect to the fiscal period beginning on or after January 1, 2016 may be able to accommodate voluntary filing of the CbC report by ultimate parent entities (UPEs) resident in their jurisdiction (“parent surrogate filing”). Where surrogate filing, including parent surrogate filing, is available, there are no local filing obligations for the MNE in any jurisdiction which otherwise would require local filing where the MNE has a constituent entity. This is subject to the following conditions:
- UPE has made available a CbC report to the tax authority of its jurisdiction of tax residence by the filing deadline (i.e. 12 months after the last day of the MNE group’s reporting fiscal year).
- By the first filing deadline of the CbC report, the jurisdiction of tax residence of the UPE must have laws in place to require CbC reporting even if filing a CbC report for the reporting fiscal year is not required under those laws.
- By the first filing deadline of the CbC report, a Qualifying Competent Authority Agreement must be in effect between the UPE’s jurisdiction of tax residence and the local jurisdiction.
- UPE’s jurisdiction of tax residence has not notified the local jurisdiction’s tax administration of a systemic failure.
- The following notifications have been provided:
- UPE notified its jurisdiction of tax residence no later than the last day of the MNE group’s reporting fiscal year.
- MNE group’s constituent entity that is tax resident in the local jurisdiction notified local jurisdiction’s tax administration that it is not the UPE nor the Surrogate Parent Entity, stating the identity and tax residence of the reporting entity, no later than the last day of the MNE group’s reporting fiscal year.
In accordance with the OECD guidance, if a parent company located in a jurisdiction that does not have a CbC exchange agreement with France voluntarily submits a CbC report for a financial year beginning on January 1, 2016, and the CbC report is transmitted by the foreign tax authority to the French competent authority, then subsidiaries or branches located in France will not be required to submit a CbC report in France.
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