The French Parliament on 5 July 2018 passed a bill authorizing ratification of the OECD's multilateral instrument (MLI)—the agreement that allows jurisdictions to transpose into their existing bilateral income tax treaties, measures to prevent base erosion and profit shifting (BEPS).
One measure in the French version of the MLI legislation concerns efforts by France to prevent companies from circumventing the definition of a “permanent establishment” in “contract splitting” situations. In this regard, the French government added a reservation to Article 14 of the MLI concerning the “splitting up” of contracts. The rational was based on legal uncertainty concerning application of this concept abroad and to allow for its subsequent cancellation.
The MLI provisions will need to be read in light of the affected income tax treaties to which France is a signatory country.
The next step in France’s process for ratification of the MLI would be promulgation of the legislation by the president, to be followed by notification to the OECD. France’s ratification of the MLI would bring the number or jurisdictions that thus far have deposited their instruments of ratification with the OECD General Secretariat to 10 countries.
For France, the MLI would be expected to enter into force on 1 November 2018 and to be effective beginning 2019.
For more information, contact a tax professional with Fidal* in France:
Cédric Philibert |+33 1 55681558 | email@example.com
Nathalie Cordier-Deltour|+33 1 55681454 | firstname.lastname@example.org
* Fidal is a French law firm that is independent from KPMG 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.