On 14th November 2012, the French Government released the draft third Amended Finance Bill for 2012 which will be examined by the French Parliament as from 3rd December. The main provisions concerning companies are detailed below. A separate e-Alert will be sent in relation to the provisions applicable to individuals.
- Presentation of computerized and other non-paper based accounting records in computerized format for the purposes of a tax audit will be compulsory
The presentation of computerized or other non-paper accounting records for the purposes of a tax audit is currently an option for companies in France. The purpose of this new provision is to oblige companies to keep their accounting records in computerized form to present them to the tax authorities in the same format (i.e. printing out the records onto paper will no longer be accepted). The above will also apply to companies taxed in the category of non commercial income “BNC”.
The draft Bill provides that companies will have to present their computerized accounting in computerized form at the beginning of the tax audit.
If a business fails to present its computerized accounting in computerized form the tax payer will be liable to a minimum penalty of €1,500 per audited year. The penalty could (if greater than €1,500) be as high as 5 per 1000 of the declared turnover (or of the reassessed turnover) or 5 for 1000 of the gross income declared (or gross income reassessed).
In addition, the failure to present the company’s computerized accounting records would be considered as willful opposition to the FTA. The FTA could in turn determine unilaterally the taxable basis of the company.
This new provision applies to audits for which the confirmation of the tax audit is addressed to the company on or after 1 January 2014. This date of 1 January 2014 is proposed to give software developers sufficient time to define the format and standards that the data must be supplied in.
- Modification of the rules in case of a transfer abroad of a French head-office or PE
In two rulings dated 29 November 2011 and 6 September 2012, the ECJ ruled that the “immediate taxation” of the unrealized gains related to assets of resident companies who transfer their assets abroad as part of the transfer of their head-office, constitutes a restriction to the freedom of establishment which is disproportionate to the legitimate objective of the fair allocation of taxing rights between Member States.
However, where national legislation provides for the immediate taxation of these assets but with a deferred payment of the tax due, over many years, then the principles of freedom of establishment and of fair allocation of taxing rights are respected.
In the case of a transfer of a head-office with its assets, French law currently provides for an immediate taxation of the unrealized gains related to the transferred assets.
In order to bring French tax law into line with the recent ECJ decisions, the draft Finance Bill provides for a 5 year roll-over of the CIT computed on the unrealized gains on the transferred assets and on any deferred capital gains, in the case of a transfer of the head-office with a transfer of the related assets from France to another EU or EEA Member State.
The tax on the gains would become immediately due if the assets were subsequently transferred into another State other than the previous ones (EU or EEA), within the 5 year period.
This provision applies to any transfer made during a financial year ended on or after 31 December 2012.
- Transposition of EU Directive 2010/45/EU dated 13 July 2010 related to the EU VAT system and invoicing
Currently, companies who want to establish efficient e-invoicing procedures with regard to VAT are subject to a number of technical requirements. In general, apart from EDI or e-signatures for electronic invoicing covered by Art 289 bis and 289 V of the French tax code “FTC”, only paper-invoices are considered as “original invoices” in the case of a tax audit or for VAT deduction purposes.
From 1 January 2013 and in accordance with the 2nd VAT Directive on invoicing 2010/45/ EU dated 13 July 2010, companies will now be able to exchange “original” invoices – in electronic or paper format - to the extent the authenticity of the origin of the invoice, the integrity of its content and its readability can be guaranteed as from its issuance up until the last date on which the invoice must be retained or archived.
The draft Bill provides that these three criteria should be considered to be met by companies who set up documented systems of internal control demonstrating that there is a reliable audit trail between the invoice and the supply of any goods or services (i.e. the notion of the ‘reliable audit trail’ becomes the main rule as detailed by EU Directive 2010/45/EU). The existing methods of e-invoicing i.e. EDI and electronic signature will be retained.
The purpose of this new provision is to ensure the acceptance by both French and other EU tax administrations of e-invoicing under the same conditions as for paper invoicing and consequently to end the restrictions in France and in other EU member states concerning the use of e-invoicing.
In addition, the draft covers other rules (as previewed by the Directive) concerning paper and e-invoicing (territoriality rules, exigibility, retention of invoices, new tax audit procedures…)
- Harmonization of the claim periods for tax and customs purposes and compensation for damages suffered for non compliance with EU law
The draft intends to bring into line the claim periods, both for tax and customs purposes, where the claim is based upon the non-conformity of French law with a superior law (ex: EU law).
As a consequence any claim based on a court decision or an opinion given in litigation, will now only cover a period running from the 1st of January of the second year (currently from the 1st of January of the third year) preceding the year during which the debt was revealed to the claimant.
Similarly, court actions for damages suffered based on the non-conformity of French law with a superior law, or a request for damages related to a debt the existence of which was revealed to the claimant on or after 1 January 2013, can now only cover a period running from the 1st of January of the second year preceding the year during which the debt was revealed to the claimant.
These provisions will apply to court actions related to debts the existence of which was revealed to the claimant on or after 1 January 2013.