France: Transfer pricing assessments; withholding tax relief for repatriated profits

France: Transfer pricing assessments; withholding tax

New Article L. 62 A of the French tax procedure code (published in the official bulletin on 2 September 2015) sets forth rules that effectively regularize the tax treatment of certain profits transferred abroad by French taxpayers, and allows for the repatriation of these funds without additional tax—and in particular, without application of withholding tax. Under the “regularization process,” qualified deemed dividend distributions that are repatriated into France will not be subject to withholding tax, provided that the taxpayer-company accepts a transfer pricing reassessment made by the tax authorities—that is, a reassessment made under application of either Article 57 or Article 238 A of the French tax law. The new measure also applies to assessments related to reconsideration of the deductibility of expenses.

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New procedure

An explanation of Article L. 62 A—provided in comments released by the French tax authorities—outlines the requirements for taxpayers to follow so that withholding tax does not apply on the deemed distributed income, transferred abroad.

First, this new procedure may be applied with respect to any company that was the subject of a proposed reassessment when profits transferred abroad are subsequently reintegrated in the taxable base of the company or when certain charges or expenses were later found to be non-deductible. Second, the amounts must have been considered to be “deemed dividends” by the tax authorities, thereby triggering a requirement for withholding tax pursuant to the provisions of an income tax treaty signed by France. 

When these conditions are met, the new procedure under Article L. 62 A can be applied, provided that: (1) no collection notice has yet been issued for the payment of withholding tax; and (2) the beneficiary of the deemed dividends is not located in a “non-cooperative” country or territory.

Conditions to claim the procedure

The regularization procedure can be asserted by a company when it files a written request indicating: (1) the income potentially subject to withholding tax; (2) the amount of tax and related penalties; (3) the tax periods covered by the request; (4) the taxpayer’s acceptance of a reassessment, per the notice of the tax authorities; and (5) information on the distributed income repatriation procedures. 

In the explanatory comments by the French tax authorities, it is noted that the repatriation of amounts qualifying as deemed dividends is to be made either through an effective payment or remittance made to the audited company or through the cancellation of debt (or a combination of both, when the amount of the debt of the audited company is less than the amount of the deemed dividends so recognized). The actual repatriation and evidence showing that repatriation has been accomplished must be completed and submitted within a 60-day period from the date when the tax authorities receive the taxpayer’s request.

Also in their explanatory comments, the French tax authorities indicated that taxpayers would not have an option to repatriate deemed dividends through the registration of a single accounting entry or by means of a capital contribution or a contribution to a current account facility.

To facilitate the implementation of this regularization process, a sample letter was provided in the official bulletin release. 

Possible outcome

If a taxpayer meets all the conditions provided by Article L. 62 A, the withholding tax and related penalties or sanctions will not apply. Because the transferred profits or a denied claim for deduction would already have been subject to tax in France through the reassessment by the tax authorities, the repatriated funds therefore would not be considered to be subject to corporate income tax of the audited French company.


For more information, please contact a tax professional with the Global Transfer Pricing Services group (Fidal*) in Paris:

Pascal Luquet, Partner | + 33 1 55 68 15 22 |

Olivier Kiet, Partner | + 33 1 55 68 1615 |

Kate Noakes, Partner | + 33 1 55 68 16 57 |

Nadia Sabin, Partner | + 33 1 55 68 17 38 |


* FIDAL is an independent legal entity that is separate from KPMG International and its member firms.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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