Thursday, February 18, 2010
France has adopted its own “black list” of countries deemed “uncooperative” in tax matters, and aims to tax at 50% dividends, interest and royalties paid to entities based in these jurisdictions.
Recently signed by Finance Minister Christine Lagarde and Budget Minister Eric Woerth, the 2010 decree contains the names of 18 countries, located outside of the European Union, that it believes to be uncooperative in terms of tax information exchange.
Based on the Organization for Economic Cooperation and Development’s (OECD) list of 23 non-cooperative states, the French government’s own list does not, however, include those countries that have signed a bilateral tax information exchange agreement with France, even though they have not, as yet, concluded the OECD’s required number of 12 tax agreements.
The sanctions are due to apply from March 1, 2010, until January 1, 2011, the date by which the list will be revised, taking into account progress made in terms of fiscal cooperation and transparency.
For a time, the French Senate had threatened to include Switzerland on the list, following Switzerland’s decision at the end of 2009 to suspend ratification of the double taxation agreement with France. This decision followed a dispute between the two countries over stolen bank data recovered by Paris. However, the ratification process has now finally resumed.
The decree also modifies an existing measure providing that dividends, paid by a subsidiary to its parent company, are granted up to 95% exemption from corporate tax. This measure will no longer apply if the subsidiaries are based in a country appearing on the government’s black list.
The list of countries is reportedly: Anguilla, Belize, Brunei, Costa Rica, Dominica, Grenada, Guatemala, Cook Islands, Marshall Islands, Liberia, Montserrat, Nauru, Niue, Panama, Philippines, St Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines.