The amendment to the Finance Act of 28 December 2011 established a surtax of 5% which increased the overall rate of corporation tax from 34,43% (social contribution included) to 36,15% and which was due for the first time on 15 April 2012, upon payment of the corporation tax balance for 2011.

This temporary contribution (financial years ended up to 30 December 2013) is aimed at bodies liable to corporation tax in France whose annual turnover exceeds €250 million.

The fiscal guideline 4 L-3-12 published on 29 March 2012 confirmed that those affected include not only all forms of companies but also French branches of foreign companies carrying out an activity on French territory and vice versa. For the latter, the turnover taken into account when assessing the €250 million threshold includes not only the turnover made in France by the branch, but also the turnover of the foreign company. This situation, questionable under EU anti-discrimination law, has already led to several claims for the reimbursement of a wrongly paid surtax.

To facilitate the collection of this additional tax revenue by the State, the draft of the II amendment to the Finance Act for 2012 provides that the companies concerned must pay a down-payment of 75% or 95% of the estimated one-off contribution (depending on whether or not the turnover of N-1 exceeds €1 billion), upon payment of the last instalment of corporation tax, i.e. on 15 December 2012 (for companies whose financial year ends with the calendar year). In the case of a major error in the estimation of the down-payment, a tax penalty of 5% and interest (at the annual rate of 4.80%) will be applied.

This situation has raised several issues, including notably the turnover to be taken into account by the French branch as regards its parent company. For example:

  • Should the turnover of the foreign company also be taken into account?
  • Could the turnover made by a foreign investment fund management company with a branch in France be taken into account? In which case, how should the management fees of the fund manager be mixed with the financial or real estate incomes derived from the French assets and calculated by the French branch?
  • Or, should the turnover made by the investment funds, on behalf of which the French portfolio is held, be taken into account and the French turnover be split into as many funds as those managed by the management company?

The tax guidelines published on 29 March 2012 do not provide any further clarification, stating only that "French and foreign entities liable for corporate income tax, doing business in France and outside France" are subject to this new French tax.

It is our view that, for foreign companies that have invested in France via a branch, this 5% surtax is not lawful.

The tax guidelines are contrary to the law on freedom of establishment under Articles 43 and 48 TFEU which provides that a Member State is not allowed to discourage the setting-up of branches in favour of subsidiaries.

The tax guidelines also contravene EU law on the principle of territoriality regarding corporate income tax - taking into account the overall turnover of a branch indirectly implies taxation of the French branch's source income at a rate based on its global revenue.

We consider that the chances of being successful by the end of the tax process are high. Nevertheless, the claim will likely be dismissed, expressly or implicitly, by the French tax authorities and the claimant will have to bring the case before the tax court. Late interest might be due by the French tax office to the successful taxpayer.


Foreign companies or funds located in the EU or states that have agreed a tax treaty with France that includes a non-discrimination clause (the US for example), that have invested in France via a branch.

Investors in French real estate or finance.


A single 5% corporation tax contribution paid in April 2012 by French branches on their taxable revenue.

The down-payment of 75% or 95% of the 5% surtax to be paid in December 2012, and the balance to be paid later.


A tax claim in the form of a letter addressed to the non-resident department of the French tax office. Proof of payment of the surtax or the down payment of the surtax should be enclosed.


Before the end of the second year following the payment of the surtax, i.e. 31 December 2014 for the surtax paid in April 2012.