Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: France 2011. Combined: Phase 1 + Phase 2

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Combined: Phase 1 + Phase 2 FRANCE

Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: France 2011 COMBINED: PHASE 1 + PHASE 2

June 2011 (reflecting the legal and regulatory framework as at February 2011)

This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: France 2011: Combined: Phase 1 + Phase 2, Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing. http://dx.doi.org/10.1787/9789264114708-en

ISBN 978-92-64-11469-2 (print) ISBN 978-92-64-11470-8 (PDF)

Series: Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)

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TABLE OF CONTENTS – 3

Table of Contents

About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Information and methodology used for the Peer Review of France. . . . . . . . . . . . 9 Overview of France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 General information on the legal and tax system . . . . . . . . . . . . . . . . . . . . . . . . .11 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 A.2.Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 B.1. Competent authority’s ability to obtain and provide information . . . . . . . . 48 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 57 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Information exchange mechanisms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . .

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59 60 70 71 75 76

4 – TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . . 83 Annex 1: The Jurisdiction’s Response to the Peer Review. . . . . . . . . . . . . . . . . 87 Annex 2: French Exchange-of-Information Mechanisms . . . . . . . . . . . . . . . . . 88 Annex 3: List of Laws, Regulations and Other Relevant Material . . . . . . . . . . 95 Annex 4: Persons Interviewed during the On-Site Visit . . . . . . . . . . . . . . . . . . 96

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ABOUT THE GLOBAL FORUM – 5

About the Global Forum The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined – Phase 1 and Phase 2 – reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once adopted by the Global Forum. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency.

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EXECUTIVE SUMMARY – 7

Executive Summary 1. This report summarises the legal and regulatory framework for transparency and exchange of information for tax purposes in France as well as the practical implementation of that framework. The international standard, which is set out in the Global Forum’s Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authority’s ability to gain access to that information, and in turn, whether that information can be effectively and timely exchanged with its exchange of information partners. 2. France has a legal framework in place which allows information to be effectively exchanged for tax purposes. Information relating to owners and other stakeholders in an entity or arrangement, as well as information relating to transactions by any entity or arrangement that is subject to registration requirements and tax obligations in France are consistently available either from public authorities (tax administration, Trade and Companies Register in particular) either directly from the entities (register of shareholders), or from third parties (e.g. banks). The information relating to accounts of commercial entities, as well as banking information, is also maintained. 3. France has one of the world’s largest networks of international instruments containing exchange of information provisions, with 142 partners. It is also one of the oldest, which France regularly maintains through the negotiation of protocols that allow this network to adapt to changes in international standards. France is also a party to European Union instruments and to the Joint Council of Europe/OECD Convention on mutual administrative assistance in tax matters. Lastly, in recent years, France has negotiated tax information exchange agreements (TIEAs) with various jurisdictions. 4. France communicates but also requests a large volume of information every year. On average, France replies to 790 requests for information a year and automatically communicates nearly two million items of information. France also sends more than 1 000 requests for information each year, mainly to its partners within the European Union.

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8 – EXECUTIVE SUMMARY 5. These exchanges primarily take place within the European Union: Belgium, the United Kingdom and Spain alone account for over half of the requests received and together with the other EU Member States account for 80% of the requests dealt with by France. In all, 50 jurisdictions have requested information from France over the past three years, and their scope is diversifying. 6. The international affairs office within the tax examination department replies directly to almost 40% of the requests for information it receives by making use of the tax administration’s databases which contain large amounts of data, relating in particular to the ownership of commercial entities active in France and to assets, as well as all bank accounts opened in France. The gathering and communication of other data is fully integrated into local activities, and it is therefore the departments responsible for the persons concerned which collect information for the purpose of exchange. They have access powers sufficient to obtain accounting, banking, and ownership information of entities. These powers permit the authorities to seek information from any taxpayer and certain third parties who might be in possession of information sought. Banking secrecy is lifted vis-a-vis the tax administration. 7. All of France’s regular partners are on the whole satisfied with the way in which France replies to their requests, even though several of them commented on the time that France takes to respond to requests. The introduction in the near future of a system that will issue automatic reminders to departments in charge of collecting information will allow response times to be reduced. France is also going to introduce a system which will allow it to keep requesting jurisdictions systematically updated on the progress of requests being processed once a period of 90 days has elapsed.

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INTRODUCTION – 9

Introduction

Information and methodology used for the Peer Review of France 8. The assessment of the legal and regulatory framework of France and the practical implementation and effectiveness of this framework was based on the international standards for transparency and exchange of information as described in the Global Forum’s Terms of Reference, and was prepared using the Global Forum’s Methodology for Peer Reviews and Non-Member Reviews. The assessment was based on the laws, regulations, and exchange of information mechanisms in force or effect as at the end of February 2011, other material and explanations provided supplied by France during the onsite visit that took place on 25-27 October 2010, and information supplied by partner jurisdictions. During the on-site visit, the assessment team met with representatives of the relevant French public agencies, in particular the General Directorate of Public Finance (see Annex 4). 9. The Terms of Reference break down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information. This combined review assesses France’s legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made regarding France’s legal and regulatory framework that either: (i) the element is in place, (ii) the element is in place but certain aspects of the legal implementation of the element need improvement, or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are also made concerning France’s practical application of each of the essential elements. As outlined in the Note on Assessment Criteria, following a jurisdiction’s Phase 2 review, a “rating” will be applied to each of the essential elements to reflect the overall position of a jurisdiction. However this rating will only be published “at such time as a representative subset of Phase 2 reviews is completed”. This report therefore includes

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10 – INTRODUCTION recommendations in respect of France’s legal framework and regulatory and the actual implementation of the essential elements, as well as a determination on the legal and regulatory framework, but it does not include a rating of the elements. 10. The assessment was conducted by an assessment team composed of two expert assessors and a representative of the Global Forum Secretariat: Ms. Graciela V. Liquin, Head of Division, International Taxation Directorate, Tax Administration of the Argentine Republic; Mr. Torsten Fensby, Project Manager, Denmark; and Ms. Gwenaëlle Le Coustumer from the Global Forum Secretariat.

Overview of France 11. France is a Member State of the European Union and of the Economic and Monetary Union formed by the eurozone countries. It has borders with eight other jurisdictions: Belgium, Luxembourg, Germany, Switzerland, Italy, Monaco, Spain and Andorra. It also has territories in the Americas, the Indian Ocean and the Pacific Ocean. 12. With 65 million inhabitants, France had a GDP of almost EUR 2 000 billion in 2008 and GDP per capita of EUR 30 600, making it the world’s fifth largest economy. The French economy is driven by services, which accounted for 77.5% of total value added in 2008. Financial services accounted for 5.8% of value added in 2009. France is the world’s second largest exporter of services and Europe’s leading agricultural power. It is Europe’s second largest producer of manufactured goods after Germany and the world’s fifth largest, with significant exports in the defence, automobile and transport sectors. 13. France’s main trading partners are its fellow-members of the European Union, which account for 60% of French exports. France ranks third in the world in terms of foreign direct investment, most of it in the OECD zone. Half of French FDI is in manufacturing industry, the other half in service industries, mainly in the financial sector. 14. A member of the OECD and the FATF, France has also been part of the Global Forum since its inception. It has played an active role in work on transparency and information exchange for tax purposes as a member of the 2002 Working Group on Effective Exchange of Information that drew up the OECD Model Agreement on Exchange of Information on Tax Matters. It was a member of the Joint Ad Hoc Group on Accounts (JAHGA) that produced the JAHGA report and standard. 15. France is also an important EOI partner since it has received and responded to about 1 800 requests for information relating to direct taxes

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INTRODUCTION – 11

over the last three years (2007-2009), not counting requests handled under the existing cross-border agreements that France signed with three partners. An average of 189 information items are provided every year on this basis.1 It also has an automatic information exchange programme which transmits two million items of information to 20 or so jurisdictions every year,2 and also makes spontaneous exchanges, albeit to a lesser extent.3 16. The requests to which France has responded in the last three years originate from 50 jurisdictions worldwide. Situations vary widely: 10 jurisdictions have sent only one request to France over the period, while three partners (Belgium, the United Kingdom and Spain) account for over half the requests handled by France. 17. France is an important partner for many members of the Global Forum, in particular within the European Union (which accounts for 80% of requests) and its involvement in information exchange led to the development of specific assistance resources, including six tax attachés on foreign postings who manage, among others, information exchange (urgent or complex matters) with twelve treaty partners.4 France has also concluded cross-border agreements that enable the tax authorities of bordering regions to exchange information directly.

General information on the legal and tax system Legal system 18. France is an indivisible, secular, democratic and social republic that asserts the rule of law over all institutions. It includes 96 départements in continental Europe as well as overseas départements, collectivités and other entities (see below). 19. France has a civil law legal system with the following hierarchy of legal instruments: the Constitution, international treaties and agreements (including European Union law), statutes of parliament, regulations and other administrative 1. 2. 3.

4.

With Germany, Spain and Belgium. A total of 3 300 information items are exchanged on this basis every year (on request and spontaneously, from and to France). Without counting automatic exchange made in the framework of the European Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments. Requests are counted according to the number of persons concerned: a request concerning two persons counts as two requests. These figures do not include all the exchanges conducted under France’s five cross-border agreements. France also exchanges a significant amount of information relating to VAT each year. United States, Canada and Mexico; Ireland and the United Kingdom; Spain and Portugal; Italy; Germany; Belgium, the Netherlands and Luxembourg.

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12 – INTRODUCTION decisions.5 Legislative power is exercised by a bicameral parliament comprising the National Assembly, whose members are elected by direct universal suffrage, and the Senate, whose members are elected by indirect universal suffrage. Under Article 34 of the Constitution, the base, rates and methods of collection of all types of taxes are determined by statute. National legislation is in principle unique for France as a whole, except where the Constitution authorises some derogations for overseas territories, in particular in tax matters. 20. Executive power lies with the President of the Republic (elected by direct universal suffrage) and the government, which is responsible for applying statutes, operating public services and maintaining law and order. It is the government that issues regulations. 21. The judiciary is independent. There are two types of jurisdiction. The judicial system comprises the criminal and civil courts, the latter including commercial courts, while the administrative system deals with most disputes between users and the administration, including the tax administration.

Tax system 22. There are four categories of taxes in the French tax system: income taxes, wealth taxes, sales taxes and local taxes. France has 48 million individual taxpayers6 and 4.4 million corporate taxpayers (companies either liable to corporation tax (for most of them), or to income tax on industrial and commercial benefits, for instance self-employed individuals). 23. Unless otherwise provided by treaty, natural persons resident for tax purposes in France are taxable on their worldwide income. Persons whose tax residency is outside France are liable to income tax on their French source income (article 4 of the French Tax Code). Tax is payable by the “tax household”, meaning the taxpayer him- or herself, or for a married couple, both spouses and any children or other persons deemed to be dependent. All their income and gains are taken together to determine a total net income to which a sliding tax scale is applied according to the income bracket. The income tax levy was estimated to have raised nearly EUR 53 billion in 2009. 24. Companies that are resident for tax purposes in France are taxed on a territorial basis (article 209 of the Tax Code). Companies resident outside France are liable to corporation tax on their income of French source. The corporation tax levy was estimated to have raised EUR 52 billion in 2009. 5. 6.

Article 55 of the Constitution states that “Treaties or agreements duly ratified or approved shall, upon publication, prevail over Acts of Parliament, subject, with respect to each agreement or treaty, to its application by the other party”. Taxpayers are all persons who pay a tax in France (income tax, corporation tax, residence tax and other local taxes, etc.).

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INTRODUCTION – 13

25. The French tax system is based on the Tax Code and the Tax Procedures Code, which contain articles derived from statutes (the number is preceded by the letter L) and from regulations (the number is preceded by the letter R). Regulations explain the statutes and enable them to be implemented.7 26. France has one of the world’s largest networks of tax treaties and bilateral and multilateral information exchange agreements, with 142 partners, as well as one of the oldest (the first treaty with Belgium dates back to 1843; see Annex 2). The competent authority for information exchange is the General Directorate of Public Finance, a Budget Ministry department responsible for the tax administration.

Certain overseas entities are not covered by the French Tax Code or by information exchange mechanisms. 27. As stated above, tax law does not apply uniformly to all parts of the French Republic. The French Tax Code and France’s information exchange network apply to continental France and to the overseas départements, namely Guiana (in Latin America), Guadeloupe and Martinique (in the Caribbean) and Reunion Island (in the Indian Ocean). 28. Overseas collectivités and other overseas entities enjoy some autonomy and are outside the scope of France’s double taxation treaties and information exchange agreements. These are Saint-Pierre-et-Miquelon (off Canada), SaintBarthélemy and Saint Martin (in the Antilles), Mayotte (in the Indian Ocean),8 New Caledonia, French Polynesia and the Wallis and Futuna islands (in the Pacific Ocean), and the French Southern and Antarctic Lands. These entities generally have powers that enable them to raise taxes and impose duties. They are also governed by most other French laws, including criminal law and antimoney laundering measures. Together, they represent 4% of the French population, 1.8% of GDP and 0.01% of the total French banking balance sheet. Their economies mainly rely on tourism and mining industry (in New Caledonia). They do not have an international financial services industry. 29. The rest of this report applies to the 96 départements in continental Europe and the four overseas départements. Mayotte will become the fifth overseas département in March 2011, following which all the provisions of the Tax Code will automatically apply.

7. 8.

It is the Constitution (Articles 34 and 37) that set the areas of the statutes and regulations respectively. Mayotte will become a department in March 2011.

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14 – INTRODUCTION

Overview of the financial sector and the relevant professions 30. The French financial system plays a significant part in the French economy. 766 000 people were employed in financial services at the end of December 2009, representing 3.3% of total employment. Value added from financial services amounted to over EUR 87 billion in 2009, which represents 5.1% of total value added (with a 7.8% increase from the previous year). The financial sector is divided into three segments: banks, insurance companies and other financial institutions. Banks and insurance companies are supervised by the Autorité de Contrôle Prudentiel (ACP)9 and other financial institutions by the Autorité des Marchés Financiers (AMF). 31. The banking sector is governed by specific rules compiled in the Monetary and Financial Code. Five major groups currently dominate the French banking sector,10 with the trend being towards further market concentration. The banking network, especially retail banking, is deeply rooted in the local fabric.

Recent developments 32. France has engaged in extensive exchanges of information for tax purposes for many years. Its long-standing network of tax treaties is currently being updated and protocols or new treaties have been concluded with 11 jurisdictions in the last three years. 27 information exchange agreements (TIEAs) were concluded with new partners over the same period. 27 of these new treaties, protocols and TIEAs have entered into force. Other protocols, treaties and agreements are under negotiation or awaiting signature. 33. France is also active at the European level since it supported the adoption of Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures, and the Directive of 15 February 2011 concerning administrative cooperation in the field of direct taxation. Lastly, at the multilateral level, France was one of the first signatories, in May 2010, of the Protocol amending the Joint Council of Europe/OECD Convention on mutual administrative assistance in tax matters.

9. 10.

Created by Ordinance 2010-76 of 21 January 2010, the Autorité de Contrôle Prudentiel is an independent administrative authority operating under the auspices of the Banque de France. Crédit Agricole, BNP-Paribas, Société Générale, Caisse d’Épargne-Banque Populaire and Crédit Mutuel. There were 706 credit institutions at the end of 2009, including 331 banks, mutual or cooperative banks and municipal credit banks.

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INTRODUCTION – 15

34. No large-scale legal reform relating to transparency and information exchange has been undertaken recently, though Decree 2010-219 of 2 March 2010 provides for the setting-up of a National Register of Fiducies (a French contract with some features of a trust) to centralise information in order to facilitate the supervision necessary to combat tax evasion, money laundering and terrorist financing. Under article 2 of the decree, the information in the register must include, inter alia, the name, first names, address, date and place of birth of natural persons who are settlors, trustees or beneficiaries of the fiducie. All fiducies must be registered in order to be valid. 35. France’s international action to promote transparency and combat tax fraud and evasion includes Act 2009-1674 amending the 2009 Budget Act, which contains a number of measures to tighten up the tax rules applicable to transactions with a non-cooperative country or territory and to increase the transparency of transactions involving international groups. The anti-abuse measures in article 209 B of the Tax Code, under which income generated in tax havens by entities controlled by French undertakings may be taxed in France, are tightened for income generated via undertakings located in noncooperative countries or territories. The rates of withholding tax on interest, dividends, royalties and some unearned income destined for non-cooperative countries or territories and on the capital gains of residents of such jurisdictions are also increased. In addition, distributions by entities located in those jurisdictions may not qualify for parent/subsidiary rules and a documentation requirement is imposed on international groups.

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 17

Compliance with the Standards

A. Availability of Information

Overview 36. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If such information is not kept or the information is not maintained for a reasonable period of time, a jurisdiction’s competent authority11 may not be able to obtain and provide it when requested. This section of the report describes and assesses France’s legal and regulatory framework on availability of information. It also assesses the implementation and effectiveness of this framework. 37. All information about the owners and other stakeholders of an entity or arrangement and information on the transactions carried out by any entity or arrangement subject to registration and tax obligations in France is available at any time either from the public authorities (e.g. tax administration, Trade and Companies Register) or directly from the entities (register of shareholders) or regulated third parties (banks) and some information is also publicly available. 11.

The term “competent authority” means the person or government authority designated by a jurisdiction as being competent to exchange information pursuant to a double tax convention or tax information exchange agreement.

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18 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 38. The most common entities in France are limited liability companies (SARL) and companies limited by shares (SAS, and SA for larger companies). The tax administration knows the identity of all the shareholders of a SARL and may obtain the identity of all the shareholders of a company limited by shares either from the company itself or from the financial institution that manages its shares. Companies, like all other commercial entities, must keep their accounting documents and underlying documentation for at least five years under tax law and ten years under company law. 39. French law allows companies to issue bearer shares but from 25 years ago, they may no longer be issued in paper form, and are immobilised by a requirement that they are held in securities accounts. They are now mainly used for stock market transactions and a system for rapidly identifying their owners is in place. Likewise, in some cases prescribed by law, shares belonging to owners not resident in France may be registered in the name of a nominee, but the nominee must declare him/herself as such and supply the name of the beneficial owner on request. 40. Fiducies and foundations exist in French law. Fiducies must be registered with the tax administration, which holds all the information about the persons connected with the fiducie (settlor, trustee and beneficiaries) and their assets. Foundations must pursue a public interest purpose and are strictly regulated by the authorities. Foreign trusts may own assets in France and trustees may be resident in France. There is no requirement to declare the existence of the trust in France but all income derived from assets in France or their transmission is taxable, which triggers some obligations of declaration with the administration. 41. Banks and other financial institutions have know-your-customer obligations and under French financial law must keep information about transactions carried out by their customers for at least five years. 42. In practice, as concerns the availability of information, France’s partners are satisfied with French responses to their information requests. Requests relating to direct taxes received by France12 from its five largest partners13 mainly concern accounting and banking information and, to a lesser extent, information about the identity of the owners of legal entities (47%, 40% and 13% respectively). 35% of requests concern SAs or SARLs and 13% concern partnerships, but the majority (52%) concern individuals.

12. 13.

In addition to information relating to direct taxes, France exchanges a considerable amount of information relating to VAT. The jurisdictions that submitted the most information requests in 2007-2009 were Belgium, the United Kingdom, Spain, Italy and Portugal.

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 19

A.1. Ownership and identity information Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.

43. There are various types of legal entities in French law. The following sections will consider joint-stock companies, bearer shares in joint-stock companies, partnerships and other legal entities (trusts, foundations and other entities), ending with a description of existing measures to ensure compliance with the laws on the ownership of relevant entities. 44. Under article 1832 of the Civil Code, a company or firm is established by two or more individuals or legal persons who agree by contract to combine property or their industry to a common undertaking with a view to sharing the benefit or profiting from the saving which may result therefrom. In certain cases provided for by statute, the firm may be established through an act of will of one person alone. The members also assume liability for the company’s losses. Companies may be commercial or non-commercial (civil). 45. The commercial nature of an entity is determined by its form (SA, SAS, SCA, SARL, SNC, SCS) or by its purpose (a commercial activity). Commercial entities (companies or partnerships) and self-employed people are defined as “merchants” or “traders”.14 Under article L. 123-1 et seq. of the Commercial Code, traders (and hence commercial companies) are bound by a number of obligations, including registration in the Trade and Companies Register and the requirement to keep accounts. Non-commercial entities (sociétés civiles) are entities that do not trade. 46. As there are many declaration and registration requirements in France, there is a one-stop contact point relating to the creation, modification or cessation of business of commercial and non-commercial entities. The contact point differs according to the type of business,15 but the information collected is centralised and disseminated to the various users. These contact points are, for instance, court registries, including commercial court registries (greffe 14. 15.

“Trader” is a key notion in French commercial law. A trader is any person having a commercial activity – and hence governed by the Commercial Code – from a grocer to a bank. Entry points are called “business formality centres”. Their scope depends on the business or legal form of the enterprise making the declaration. There are seven types of centre: the chamber of commerce and industry of the département concerned for traders, the commercial court registry for sociétés civiles, chambers of agriculture, chambers of trades and crafts, the business tax centre, URSSAF (social security agency) and the national chamber of inland waterway transport.

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20 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION or clerk), which manage the Trade and Companies Register,16 tax and social security authorities and INSEE, a public authority which issues the SIREN company identification number.17 In all cases, these public authorities or public officers ensure the accuracy of the provided information; the aim is to ensure full legal security to third parties that may or will enter into a relationship with these entities. Further entries are also made in their databases as legal entities submit declarations during the course of their lifetime. 47. The Trade and Companies Register is a database containing public information about all the stages in the life of commercial entities, from registration and changes in shareholders to termination. Although the register is managed locally by the approximately 180 commercial court registries, all the information is centralised and may be consulted online, for a fee, on the Infogreffe website, to which the tax administration has access. 48. The tax administration has a user-based information system. All the administration’s databases are interconnected and input data to one other in real time. This allows users, through their tax account, to access all the information concerning them. By the same token, the administration also has full information about the situation of a given person. The administration has at its disposal several databases inside the administration which collate information regarding the ownership of legal entities, in particular:

16.

17.

‡

Transparence Structure Écran (structure transparency screen, TSE) is a tool for identifying shareholders/partners, enabling the tax administration to recreate shareholder/manager links between natural or legal persons and entities. For a given entity, TSE provides identification data (name, first name, date of birth and address of an individual or name and address of a legal person) for the manager or managers and the shareholders/partners and the name of any other undertakings of which the entity is itself a shareholder/partner.

‡

The Base Nationale des Données Patrimoniales (national assets database, BNDP) contains information drawn from instruments and declarations relating to assets, such as articles of association, changes to share capital, windings-up, mergers, business transfers and business pledges.

Commercial entities do not acquire legal personality until they are registered in the companies register (article 1842 of the Civil Code and article R.123-1 et seq. of the Commercial Code), which they must do within 15 days of incorporation. The commercial court clerk must arrange for the publication of a notice containing the company’s particulars in BODACC, the official bulletin of civil and commercial notices, within eight days of registering the entity (article R.123-155 et seq. of the Commercial Code). All commercial and non-commercial entities and all fiducies are assigned a SIREN number when they are created.

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Companies (Sociétés de capitaux, ToR A.1.1) 49. Sociétés de capitaux are commercial companies constituted from the capital provided by the shareholders (at least EUR 37 000). The capital is divided into shares. There are four types of companies.

18. 19.

‡

A SARL (société à responsabilité limitée, limited liability company) is a commercial company formed by one person (in which case it is an EURL18) or several persons (not more than 100) (article L. 223-1 et seq. of the Commercial Code). It has some of the features of a joint-stock company, including limitation of the risks borne by the members, though relations between the members take account of their person (intuitu personae) and all the shares must be subscribed by members. In practice, the SARL is by far the most common corporate form, since there are 1.2 million SARL or EURL in France, representing 82% of all companies. It is a particularly suitable form for small and medium-sized enterprises.19

‡

The société anonyme (public limited company, SA) is constituted by the shareholders who are liable for losses up to the amount of their contribution. There may not be fewer than seven shareholders (article L. 225-1 of the Commercial Code). There are approximately 64 000 sociétés anonymes, generally large firms, which may be listed. Shares may be in registered or bearer form (see Section A.1.2 below).

‡

The société par actions simplifiée (simplified joint-stock company, SAS) is a commercial company governed in principle by reference to the rules for the SA, though its organisation is more flexible since its mode of operation, including consultation and majority voting rules, is defined in the articles of association. It may have a single shareholder (article L. 227-1 of the Commercial Code). There are 126 000 SAS, a particularly attractive form for family firms. Shares must be in registered form (article L. 227-2 of the Commercial Code).

‡

The société en commandite par actions (partnership limited by shares, SCA) is formed by one or more managing partners, who are traders and are indefinitely and jointly liable for the partnership’s debts, and limited partners who are shareholders and liable for losses only up to the amount of their contributions. There may not be fewer than three limited partners (article L. 226-1 of the Commercial

Entreprise unipersonnelle à responsabilité limitée, or single-member limited liability company. SARLs are formally sociétés de personnes but have some features of sociétés de capitaux and are generally taxed as sociétés de capitaux.

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22 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION Code).20 There are only 382 SCA. Shares may be in registered or bearer form (see Section A.1.2 below). 50. In addition, European companies (sociétés européennes, SE) are governed by Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company, transposed into French law at article L. 229-1 et seq. of the Commercial Code. A European company can operate in all EU Member States in a single legal form common to all Member States and defined in EU law. Under article 10 of the Regulation, the rules that apply to European companies are those for public limited-liability companies. Articles L. 225-1 et seq. of the Commercial Code therefore apply to European companies, without prejudice to article L. 229-1 et seq. (for example, an SE may have only one shareholder). A European company’s head offices must correspond to the place where it has its central administration, i.e. its real headquarters. 51. Companies hold information identifying their owners and keep it up to date. The incorporation of a company also entails registration and publication requirements.

Information held by the French authorities 52. The identity of all the members of a limited liability company is included in its articles of association, which are sent to the court registry when the company is registered in the trade and commercial register (registre du commerce et des sociétés). The articles also include the value of the shares or of the contributions of each member. In addition, article L. 223-6 of the Commercial Code provides that all the members must be party to the instrument of incorporation, either in person or via a proxy on production of a special authorisation. In this situation, the name of the real owner is mentioned in the articles of association (intuitu personae). Any transfer of shares entails an amendment to the articles (article R.223-13 of the Commercial Code). 53. As concerns the other types of companies, the information to be provided is firstly the company’s articles of association (SA, SAS or SCA), which must be drawn up in writing and state the form, purpose, name, registered office, share capital and term of the company and how it will operate, 20.

The difference between an SCA and a société en commandite simplifiée (ordinary limited partnership, SCS) is that there is no consideration of the person in the former. The limited partners are merely providers of capital: who they are is not relevant and their shares may be traded freely. In contrast, consideration of the person is a fundamental component of the SCS, which is thus categorised as a société de personnes (partnership) rather than a société de capitaux (joint-stock company) (see following section, ToR A.1.2).

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the form of the shares (registered only or in registered or bearer form) and the name of the founding members (article 1835 of the Civil Code and articles R. 123-103, R. 224-2 and L. 225-2 of the Commercial Code21). The articles of association need not be amended on a change of shareholders except in the case of a SCA, whose managing partners, as members indefinitely and jointly liable for the partnership’s debts, must always be identified in the articles of association by their name, customary name or pseudonym and first names (article R. 123-54 of the Commercial Code). 54. In tax matters, SARLs, SAs, SASs22 and SCAs are required, like any other legal person engaging in business for profit, to declare their existence and any changes to their fundamental corporate arrangements to the tax administration. They must declare their company name, legal form, principal purpose, term, registered office and principal place of business (article 222 of the Tax Code and article 23A of Annex 4 thereof). In the case of SARLs, the name of all the members must also be declared. 55. The administration also directly possesses a certain amount of information for companies other than SARLs. In their annual corporation tax return, companies are required to identify shareholders owning 10% or more of their capital (page 17 of the annexes to the tax return). In addition, if the company distributes profits, the persons who pay the capital gains tax are required to declare the identity and address of the beneficiaries23 (article 242 ter of the Tax Code). The complete structure of all companies is therefore not maintained by the tax administration, but by the companies themselves (see below). 56. Exceptionally, companies may under certain conditions24 elect to be taxed in the same way as partnerships. In that case they are subject to the same declaration requirements and must provide the identity of all their shareholders with their annual tax return (article 48 of Annex 3 of the Tax Code, see Partnerships below). 21. 22. 23. 24.

For SAs whose shares are not offered to the public, the articles of association must be signed by the shareholders, either in person or by a proxy with special authorisation (article L. 225-15 of the Commercial Code). For the purposes of the French Tax Code and its annexes, the SAS is treated as an SA (article 1655 quinquies of the Tax Code). They must also declare, by type of income, the taxable amount and the tax credit, the gross income liable to withholding tax and the amount of the withholding and the amount of exempted income. SARL, SA, SAS and SCA where the majority of the capital and voting rights is held by individuals and 34% is held by the company’s managers, and certain property companies (Articles 206, 239 bis AA, 239 bis AB and 1655 ter of the Tax Code).

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24 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 57. Legal persons may be shareholders of companies. The obligations of disclosure of companies do not include an obligation to identify the beneficial owners where there is a chain of ownership. In practice, however, the databases of the tax administration allow the tax administration to trace a chain of owners holding at least 10% of the shares, provided that the company, the ownership of which is sought, is resident in France. The database contains hypertext links: clicking on them takes the person consulting the database from the file on the company to the file on the company that owns the shares. On the other hand, all legal persons members of a SARL are identified in the articles of association, which are amended each time shares of the SARL are transferred, without any threshold. Finally, for all types of companies, when the information is not held in the tax databases the administration can request the information to the company concerned itself or to a third party (e.g. financial intermediary, see below). 58. Foreign companies from outside the European Economic Area that have a permanent establishment in France are subject to a registration requirement and are liable to a penalty for non-compliance. They must previously have made a declaration to the local representative of the state (the Préfet of the département concerned) and have provided the company’s articles of association.25 They must also inform the tax administration of their business activities liable to tax and provide the address of their main place of business and the identity of their representative in France (article 23D of Annex 4 of the Tax Code). Finally, they must provide the tax administration with an annual tax return where, as French companies, they are required to identify shareholders owning 10% or more of their capital (page 17 of the annexes to the tax return). 59. Since 1954, commercial court registries have been required to keep the information in trade and companies registers indefinitely (article A. 123-65 et seq. of the Commercial Code, especially article A. 123-72). Likewise, the tax administration keeps information for an unlimited time.

Information held by companies and other persons 60. The identity of the members of SARLs is included in the articles of association, as mentioned earlier, and share transfers to third parties is possible only with the prior notification of all the members and the approval of the majority of them (articles L.223-13 to L223-17 of the Commercial Code). All the members therefore know the identity of the other members. The articles of association are kept either at the company’s registered office, with each member receiving a copy, or by a notary (article R. 223-1 of the Commercial Code). 25.

The maximum penalty is six months’ imprisonment and a fine of EUR 3 750, plus possible closure of the establishment (see articles L. 122-1, L. 122-2, L. 123-1 and D. 122-1 to 122-4 of the Commercial Code).

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Registered shares accounts and the share register of SA, SAS and SCA 61. As mentioned above, apart from SARLs, only the names of the founder members are mentioned in the articles of association of joint-stock companies. They may issue shares in either registered or bearer form (see A.1.2). Whatever their form, shares must be entered in an account in the name of their holder under the conditions set forth at articles L. 211-3 and L. 211-4 of the Monetary and Financial Code. Shares are immobilised through their computerised listing in a share account. For registered shares, the account is kept by the company issuing the shares or by a delegated manager (titres nominatifs purs), or by a financial intermediary regulated by the Autorité des Marchés Financier and hence subject to anti-money laundering laws (titres nominatifs administrés). 62. The share account is opened in the name of one or more of the shareholders of the relevant entity. Exceptionally, a share account may be opened in the name of a fund or collective investment arrangement26 or a nominee (see below). In France, the company issuing the shares may obtain this information on the basis of articles L. 228-3 of the Commercial Code and L. 211-5 of the Monetary and Financial Code. 63. Whether registered shares are managed by the company itself or by a financial intermediary, the issuing company is required to keep a register of registered shares, stating the precise identity of the shareholders. For natural persons, this would be the name, first name and address of the holders (and the former holders if shares are transferred; articles R. 228-7 et seq. of the Commercial Code).27

Nominees (mandataires) 64. The concept of nominee that exists in some jurisdictions, in particular under Anglo-Saxon law, does not exist in French law. Registered shares issued by joint-stock companies registered in France are in principle held by their beneficial owner, whose identity is known to the issuer, with one 26. 27.

Investment funds, property investment funds and securitisation funds. The name of the fund may validly replace that of all the co-owners. Shareholders are not provided with a list of all the shareholders of a company but are entitled to obtain it (article L. 225-116 of the Commercial Code). Shareholders of companies that have issued shares admitted for trading on a regulated market are required to report significant interests to the company concerned and to the AMF whenever, individually or in concert, they exceed or fall below a set of thresholds relating to capital or voting rights. The thresholds are 5%, 10%, 15%, 20%, 25%, 33.3%, 50%, 66.6%, 80% and 95% (article L. 233-7 of the Commercial Code).

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26 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION exception. Where a company’s shares have been admitted for trading on a regulated market and the holder does not have his residence (main establishment28) in France, an intermediary may be registered on the holder’s behalf (see below bearer shares). 65. On opening his share account, the intermediary is always required to declare his status as a mandataire (nominee) holding the shares for another person. The intermediary is required to disclose the identity of the holders of the shares and the number of shares held by each one on a request from the issuing entity, which may be made at any time.29

Anti-money laundering legislation 66. French arrangements to combat money laundering and terrorist financing derive from EU directives,30 transposed in articles L. 561-5 to L. 561-14-2 and R. 561-1 to R. 561-54 of the Monetary and Financial Code. The scope of persons subject to know-your-customer and data conservation requirements for their usual customers, and in some cases occasional customers, covers all persons engaged in a financial activity, plus a number of nonfinancial professions such as the legal professions (except in the case of court proceedings or legal advice), accountants and auditors and fiduciary attorneys (article L. 561-2 of the Monetary and Financial Code). The definition covers for instance all professions authorised to act as trustees of a French fiducie. 67. In addition to the identity of their customers, reporting persons must identify and, where relevant and taking account of the risks of money laundering, verify the identity of the beneficial owner of the business relationship, defined as the “natural person who directly or indirectly controls the customer or for whom a transaction or activity is conducted”.31 The threshold for control (direct or indirect) is set at 25% of a company’s capital or voting 28. 29.

30. 31.

Article 102 of the Civil Code. The intermediary must respond within 10 working days (articles L. 228-3 and R. 228-5 of the Commercial Code). If no response is forthcoming, the shares are stripped of voting rights. Whenever the issuing company considers that certain holders whose identity has been provided to it are acting on behalf of third-party owners of the securities, it is entitled to ask the said holders to disclose the identity of the owners of those securities and the number of securities held by each of them (article L. 228-3-1). Directive 2005/60/EC of the European Parliament and of the Council (the Third Money Laundering Directive) and its implementing directive 2006/70/EC. France is also a member of the Financial Action Task Force (FATF). Articles L. 561-5, L. 561-2-2, R. 561-1 and R.561-7 of the Monetary and Financial Code. Appropriate means must be used to make the verification, taking account of the risks of money laundering and terrorist financing.

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rights. Control also includes the power of control by any other means over the company’s managerial, administrative or executive bodies or over the general meeting of its members. The documents collected for this purpose must be kept for five years after the closure of their accounts or the cessation of their business relationships, without prejudice to more stringent measures (article L. 561-12 of the Monetary and Financial Code). 68. Overall, the very comprehensive obligations in company and tax law meet the standard, and the know-your-customer obligations imposed by antimoney laundering legislation have no impact on information exchange for tax purposes. Their impact remains theoretical, since the authorities have never had occasion to use this source of information. However, it is worth noting that banking services are used extensively in France and that since all traders must have a bank account (article L. 123-24 of the Commercial Code), banks, by verifying their customers’ identity, possess a considerable amount of information. 69. The only noticeable feature of French anti-money laundering legislation is the identification requirement relating to foreign trusts (see Section A.1.4).

Bearer shares (ToR A.1.2) 70. In France, bearer shares are immobilised (there is no more “paper” shares) and must be identifiable so that companies can know who their shareholders are (article L. 228-2(1) of the Commercial Code). Bearer shares, like registered shares, must be entered in an account; shares may only be transferred from account to account. France has appropriate mechanisms in place to allow the owners of bearer shares to be identified. 71. As mentioned above, public limited companies (SA) and partnerships limited by shares (SCA) may issue bearer shares rather than registered shares, which must be specified in the articles of association (article L. 228-1 of the Commercial Code and article L. 412-2 of the Monetary and Financial Code). Companies may only issue bearer shares in two cases: either the shares are negotiated in a regulated market; or the shares can be included in the transactions of a central depository, when the share account is held by an intermediary who has an account that is subject to anti-money laundering legislation, particularly in the case of shares negotiated in a multilateral negotiating system (article L.211-6 and following of the Monetary-Financial Code), in which case the conditions enabling the company to identify the shareholders set forth in the Commercial Code must be fulfilled (articles L. 212-3 and L. 212-4 of the Monetary and Financial Code). In addition, the intermediary is a client of the financial institution and hence is covered by the requirements under the money laundering legislation, including the identification of the customer and beneficial owner.

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Partnerships (ToR A.1.3) 72. A partnership (société de personnes) is a corporate form to which each member agrees to participate taking into consideration each other member in their personal capacity (intuitu personae). As a result, each member’s share can be transferred only with the other members’ consent. The articles of association must be amended when a transfer occurs. There are two types of commercial partnership in French law (article L. 210-1 of the Commercial Code), as well as sociétés civiles. %

A société en nom collectif (general partnership, SNC) is a commercial entity with at least two members (who are traders) who are jointly and severally liable for the partnership’s debts (articles L. 221-1 et seq. of the Commercial Code).

%

A société en commandite simple (limited partnership, SCS) is a FRPPHUFLDOHQWLW\WKDWRQO\SDUWO\IXO¿OVWKHFULWHULDIRUXQOLPLWHGOLDELOLW\ entities since it comprises two classes of members: managing partners, who are jointly and severally liable for the partnership’s debts, and limited partners, who incur no liability for the partnership’s debts and whose risk is limited to the amount of their contribution (they are essentially ¿QDQFLDOEDFNHUV /LPLWHGSDUWQHUVPD\QRWFDUU\RXWDQ\H[WHUQDODFWRI management, even by virtue of a power of attorney. The rules relating to SNC apply to SCS (article L. 222-1 et seq. of the Commercial Code).

%

$OOHQWLWLHVQRWRWKHUZLVHGH¿QHGDUHsociétés civiles (article 1845 of the Civil Code), except for joint ventures (société en participation).32 There are 72 000 sociétés civiles in France, representing a little less than 5% of DOO)UHQFK¿UPV7KH\DUHFRQVLGHUHGLQ6HFWLRQ$

73. There are few SNCs (5 000) and even fewer SCSs (700), i.e. less than 1% of all French commercial entities. The general partnership is a form suited to active cooperation between a small number of traders, especially family companies. However, the French authorities have stated that a SNC may be included in the structure of a large group, to form a holding company, in order to safeguard against the acquisition of an interest by a third party, since shares may be transferred only with the members’ unanimous consent. 74. About 13% of information requests from France’s five main treaty partners concern partnerships.

32.

Unregistered and fiscally transparent entities without legal personality.

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Information held by the French authorities 75. There are some important requirements of identification of partners since they are jointly and severally liable for the partnership’s debts. The full knowledge of the identity of all partners is therefore essential to third parties, including the public authorities. The identity of the members of these entities must therefore be stated in the articles of association, which are filed with the registry when the entity is registered in the trade and companies register.

Publication and registration formalities 76. The identity of all the members of a SNC must be stated in the articles of association, which must be filed when the entity is created (article 1835 of the Civil Code and article R.123-103 of the Commercial Code). Transfers of shares must be established in writing and published in the register (articles L. 221-14, R. 221-9 and R. 222-1 of the Commercial Code), otherwise they are not binding on third parties. 77. Likewise, the identity of all the members of a SCS must be stated in the articles of association, together with the amount or value of the contribution of each one, whether a managing or a limited partner.33 As with a SNC, the articles of association of a SCS must be filed on creation of the entity and amendments (transfers of shares) must be notified to the court registry for inclusion in the trade and companies register (articles L. 222-4 and R. 123103 of the Commercial Code). 78. A legal entity may be a member of a partnership. Since members are jointly and severally liable for the partnership, the registration request and the articles of association must indicate the name of the partnership, its legal status, the address of the main office and the identification number and name of the city of the court registry in which they are registered (article R.123-54 of the Commercial Code).

Tax obligations 79. From a tax standpoint, SNCs and SCSs are semi-transparent: corporate profits are taxed not in the name of the entity but in the name of the members, unless the entity has elected to be taxed as a company, an 33.

In addition to the articles of association, which contain the names of all the members, the identity of all the members of a SNC and of the managing partners of a SCS (having several and joint liability for the partnership’s debts) must be provided separately when the partnership is registered (article R. 123-54 of the Commercial Code). The partnership must declare their name, customary name or pseudonym, first names, domicile, date and place of birth and nationality.

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30 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION irrevocable choice. However, the partnership is itself regarded as a taxpayer, even though the members are taxed on the partnership’s income, proportionally with their shares in capital, whether they are resident or not.34 The partnership itself has an obligation to declare its income every year. 80. Partnerships, like companies, must declare their existence to the tax administration within one month of their creation. On that occasion they must give the name, first names and address of each member,35 and any change of member must be declared to the administration within one month.36 They must also provide the same information on the identity of their members with their annual tax return and declare the share of profits distributed to each member (unless they have elected to be taxed as companies,37 cf. article 48 of Annex 3 and article 242 of the Tax Code). 81. The tax administration therefore knows the identity of the members of SNCs and SCSs.

Information held by partnerships and other persons 82. The identity of the members of partnerships is included in the articles of association, as mentioned earlier, and shares may be transferred only with the consent of all the members, established in writing. All the members therefore know the identity of the other members. The articles of association are kept either at the partnership’s registered office, with each member receiving a copy, or by a notary (articles R. 221-1 and R. 222-1 of the Commercial Code). 83. The articles of association and their annexes and any amendments must be kept by the managers for five years after the partnership has been deleted from the trade and companies register, in accordance with the civil law statute of limitation (article 2224 of the Civil Code).

34.

35. 36. 37.

According to the case law arising from Conseil d’État judgments in Kingroup Inc. of 4 April 1997 and Hubertus AG of 9 February 2000, a French partnership has tax personality and is liable to taxation, implying that its members are taxed in France, whether or not they are resident there for tax purposes, in the amount of their share of the profits from its operations. For legal persons members, the declaration form asks for their name, the address of their registered office, the place of registration and the registration number. Articles 222 and 635 and of the French Tax Code and Articles 23A to 23G of Annex 4 of the French Tax Code. Any transfer of shares is liable to tax corresponding in principle to 3% of its value. The managers of SNC and SCS that have elected to be taxed as companies must provide the name, first names and domicile of each member but not their share of profits.

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84. Certain persons outside the partnership (banks or notaries, for example) may also keep information on the identity of the members of partnerships under anti-money laundering laws (see above).

Trusts (ToR A.1.4) 85. Fiducies, structures similar but not identical to trusts,38 were introduced into French law by Act 2007-211 of 19 February 2007 establishing the fiducie (the Fiducie Act). Now, they are mostly governed by the Civil Code. Certain articles of the Tax Code also make explicit reference to fiducies and foreign trusts.39 86. To date, France has not received any EOI requests relating to a French fiducie or a foreign trust.

French fiducies 87. Under article 2011 of the Civil Code, fiducie is an arrangement whereby one or more settlors transfer assets, rights or sureties, present or future, to one or more trustees who, keeping them separate from their own assets, act for a specific purpose for the benefit of one or more beneficiaries. The fiducie must be express and may not be used for the purposes of transferring assets free of charge. The Fiducie Act established: ‡

the management fiducie, a contract whereby the settlor transfers assets or rights to a trustee who is responsible for managing them in the interest of either the settlor or a third party. This type of fiducie is governed by articles 2011 et seq. of the Civil Code;

‡

the surety fiducie, a contract whereby a person transfers title to assets or rights to a trustee to secure an obligation. Specific provisions for this kind of fiducie are contained in the Ordinance of 30 January 2009, whether the object is personal property or a right (article 2372-1 et seq. of the Civil Code) or real property (article 2488-1 et seq. of the Civil Code).

88. To be valid, the fiducie contract must stipulate: (i) the assets, rights or sureties transferred; if they are future assets, they must be determinable; (ii) the duration of transfer, which may not be more than 99 years; (iii) the identity of the settlor(s); (iv) the identity of the trustee(s); (v) the identity of the beneficiary or beneficiaries or, failing that, the rules by which they are 38. 39.

Unlike a trust, a French fiducie is a contract. Articles 238 quater A to 238 quater Q for fiducies, Articles 120 and 238bis-01 for trusts.

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32 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION designated; (vi) the purpose designated to the trustee(s) and the scope of their powers of administration and disposal (article 2018 of the Civil Code). 89. The French tax administration possesses information about the identity of the settlors, trustees and beneficiaries of French fiducies. The fiducie contract and any amendments to it must be registered within one month at the tax office of the place where the trustee has his/her registered office (or at the tax office for non-residents if the trustee is not domiciled in France; article 635 of the Tax Code and article 2019 of the Civil Code40) and the tax administration centralises this information in a National Register of Fiducies41 to facilitate measures to combat tax evasion, money laundering and terrorist financing. The information is kept for ten years after termination of the fiducie contract. 90. The National Register of Fiducies also contains the name, first names, address, date and place of birth of natural persons and the company name and SIREN number and the address of the registered office or establishment of legal entities. 91. The settlor (natural or legal person ) and the trustee must be resident in a Member State of the European Union or in a state or territory that has concluded a tax treaty with France containing an EOI provision with a view to combating tax fraud or evasion (article 13 of the Fiducie Act). 92. Under article 2015 of the Civil Code, only credit institutions, investment firms, insurance companies, certain public institutions and agencies (Trésor Public, Banque de France, La Poste, Caisse des Dépôts et Consignations, etc.) and attorneys may be trustees. The obligations and penalties arising from measures to combat money laundering and terrorist financing apply to trustees (article L. 561-1 et seq. of the Monetary and Financial Code, see Section A.1.1). 93. All persons involved in a fiducie must keep documents relating to the identity of the settlors, trustees and beneficiaries for ten years after termination of the contract. As at 31 December 2010, seven fiducies were registered.

Foreign trusts having a link with France 94. The concept of trust does not exist in the French legal system. France has been a signatory of the Hague Convention of 1 July 1985 on the law applicable to trusts and on their recognition since 1991 but has not ratified it,

40. 41.

Where fiducie contracts relate to real property or real property rights, they must also be registered with the Mortgage Registry (Articles 647 and 657 of the French Tax Code). Article 2020 of the Civil Code and Decree 2010-219 of 2 March 2010.

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and the French Government has not yet decided to ratify it.42 There is, however, no obstacle in French domestic law that prevents a French resident from acting as a trustee or for a foreign trust to own assets in France. 95. As regards the availability of information regarding settlors, trustees and beneficiaries of trusts, the French law does not require the registration of foreign trusts in the Register of Fiducies or to disclose immediately this information. However, if estate property is concerned, the previous and new owners must be disclosed in front of a notary public.

Tax obligations 96. The French tax administration maintains some information if the professional trustee is resident in France, the trust is administered in France or some assets are located in France. The Tax Code provides that the benefits of trusts are considered as income, whatever assets compose the trust (article 120) must therefore be declared. A professional trustee is subject to the tax obligations related to his/her main profession, which allows the tax administration to collect all information related to the trust, as client of the professional. 97. In addition, some other obligations apply to persons linked to a trust. As regards the settlor and beneficiaries, any contribution of property or holding of property into a trust must be declared to the tax administration. There also exist some anti-abuse provisions that specifically relate to trusts (articles 123 bis and 209B of the Tax Code). 98. Again, the tax administration can use all the procedures at its disposal to seek and request any information not already in its possession. The French authorities may ask the taxpayers or the trustee for all information necessary to determine the amount of taxable income or assets. 99. From a general perspective, if information is considered necessary for French tax assessment purposes, the taxpayer has an obligation to disclose such information to the tax authorities. This may include information about settlors, trustees and beneficiaries. Furthermore, trustees resident in France are subject to record-keeping requirements for the determination of their own income. Thus, all records that are necessary for determining whether the trust income is taxable in the hands of the trustee must be kept. This includes the names of the settlors and named beneficiaries of the trust and the nature of the assets in the trust that have generated the income. 42.

See ministerial answer to written question no. 06210 from Mr. Philippe Marini published in the Senate Official Journal of 13 November 2008. Ministerial answers have legal value and are binding on the administration.

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34 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 100. Therefore, because general tax requirements in France require that all taxpayers be able to provide information to the tax authorities whenever taxable income must be determined, a trustee resident in France must be able to provide the tax authorities with information on the settlors and beneficiaries of trusts that he/she administers.

Money laundering 101. Lawyers and accountants acting as trustee, as well as trust service providers such as financial institutions, are subject to anti-money laundering requirements. They must identify and, where relevant and taking into account the money laundering risks, verify the identity of their clients and the beneficial owner of the business relationship, defined as the “natural person who directly or indirectly controls the customer or for whom a transaction or activity is conducted”.43 For the purposes of a foreign trust, the beneficial owner of a transaction is the natural person(s) who is the settlor (rights holder) or beneficiary of at least 25% of the entity’s assets as well as the persons belonging to a class of beneficiaries when not yet designated (article R. 561-3 of the Monetary and Financial Code). Administrators and trustees are included in the definition of managers, who must also be identified. Tracfin (the French financial intelligence unit) may report the information it receives to the tax administration when it relates to facts that could amount to tax fraud and evasion (article L.561-29 of the Monetary and Financial Code). The situation where a trustee in France is not acting by way of business, would not be a professional subject to anti-money laundering rules, and would not have a bank account in France is hypothetical. Such a case, in any event, would not have any consequence on the tax obligations discussed above.

Practical consequences and conclusion 102. In practice, the French authorities indicate that the trustees of foreign trusts are very rarely resident in France and foreign trusts are very rarely administered in France. France has not received any request for information about a foreign trust (or a French fiducie) in the last three years, which appears to confirm that, given the volume of information exchanged by France, the presence of trusts is insignificant (the only request indirectly linked to a foreign trust related to a trader who had a commercial relationship with a foreign trust). Several factors would explain this situation. The fact that France does not recognise the concept of trusts creates a legal risk for the persons involved in a trust. Thus the assets transferred to a trust may be considered to be owned by the trustee, and therefore part of his/her assets, for example in case of death, concerning potential actions of creditors, or for 43.

Articles L. 561-5, L. 561-2-2, R. 561-1 and R. 561-7 of the Monetary and Financial Code.

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wealth tax purposes. Finally, the tax consequence on benefits drawn from the activities of the trustees depends on a case by case analysis.44 103. In conclusion, while trustees resident in France are not subject to specific obligations to keep identity information regarding settlors and beneficiaries of express trusts, the anti-money laundering obligations, together with the obligation to submit information to the tax authorities, permit the availability of such information. In addition, comments from France’s peers do not indicate that in any instance the French authorities have not been in able to provide information on trusts. It can therefore be concluded that France has taken all reasonable measures to ensure that information is available to its competent authorities that identifies the settlor, trustee and beneficiaries of express trusts administered in France or in respect of which a trustee is resident in France.

Foundations (ToR A.1.5) 104. There is no provision for private-interest foundations in French law. Foundations are non-profit entities established exclusively for public-interest purposes and are strictly regulated because they may receive public subsidies. Act 87-751 of 23 July 1987 on the encouragement of philanthropy instituted public-interest foundations45 and corporate foundations, whose sole purpose must be to pursue an endeavour of general interest. A foundation may not have a commercial or tax purpose. The assignment of assets to a foundation is irrevocable.46 French foundations are not considered to be relevant entities under the Terms of Reference.47

44. 45.

46. 47.

Taxation can be on the income and/or assets of the trust. See written question n° 13738 of Mr. Michel Charasse published in the Senate Official Journal of 16 September 2004. Under Article 18 of the Act, “foundation is the act whereby one or more individuals or legal entities decide to irrevocably transfer assets, rights or resources for the accomplishment of a non-profit endeavour in the general interest. Where the purpose of the act of foundation is to create a legal entity, the foundation shall have legal personality only as of the date of entry into effect of a Conseil d’État decree according recognition of public interest, whereupon it acquires the status of public-interest foundation.” If a foundation is dissolved, the net assets are devolved to one or more public or public-interest establishments whose purpose is to pursue an endeavour in the general interest. In practice, France has not received any information request relating to a foundation in the last three years.

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Other entities and relevant arrangements (ToR A.1.5) Sociétés civiles 105. Sociétés civiles (non-commercial entities) are governed by articles 1832 and 1845 to 1870-1 of the Civil Code. Members are indefinitely liable for the company’s debts in proportion to their share in the capital and must therefore all be registered when the company is registered at the district court registry (article 1857 of the Civil Code and article R. 123-54 of the Commercial Code).48 106. There are various types of sociétés civiles according to activity: management of assets (property, portfolio), farming, professional activity (law firms, notaries, etc.), property development, etc. There are over 72 000 sociétés civiles in France, representing less than 5% of the total number of French legal entities. 107. The articles of association must state the form, purpose, name, registered office, capital and term, each member’s contribution and the entity’s rules of operation (article 1835 of the Civil Code). The members are therefore identified when the articles of association are signed and each one receives a copy (Decree 78-704, article 31(1)). 108. All sociétés civiles must be registered with the tax administration in the same way as companies and file their articles of association on incorporation and in the event of subsequent amendment (article 853 et seq. of the Tax Code). Sociétés civiles must also be registered with the Mortgage Registry (conservation des hypothèques) when contributions of real property are established in their articles of association. Sociétés civiles formed for professional purposes are registered only after they have been approved by the competent authority or included in the lists or tables of the relevant professional body (Act 66-879 of 29 November 1966, article 1(3)).

Enforcement provisions to ensure availability of information (ToR A.1.6) 109. France should have in place effective enforcement provisions to ensure the availability of ownership and identity information, one possibility among others being sufficiently strong compulsory powers to access the information (see Section B below). This subsection of the report assesses whether the provisions requiring the availability of information with the public authorities or within the corporate entities concerned are enforceable and failures are punishable. Several sets of penalties exist, according

48.

See also the company registration forms on www.greffes.com.

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to whether the infringement concerns the content of a company’s articles of association, its registration or its tax returns. 110. Articles R. 123-92 to R. 123-101-1 of the Commercial Code contain provisions relating to the formal control of applications to register commercial enterprises (companies or partnerships) in the trade and companies register. Clerks, who are public officers, are responsible for ensuring the orderly nature of all applications, whether they relate to registration, amendment or removal of a company or partnership. Inter alia, they must verify that the information provided complies with the relevant laws and regulations. If they consider that the application is compliant, registrars must complete the registration within one working day of receiving the application unless they deem that closer examination is required, in which case they have five days. Clerks may at any time verify that registered information continues to be compliant and may ask an entity to rectify an incorrect registration. If the clerk notes mistakes or omissions, he/she requires the applicant to correct them and informs the court. If the required rectifications are not made within one month, the court orders the person to conform to the law. Failure to comply with the court order within 15 days is punishable by a fine of EUR 3 750. In addition, knowingly providing inaccurate or incomplete information is punishable by a fine of EUR 4 500.49 A daily fine may also be imposed for as long as the obligation is not fulfilled (articles L. 123-3 to L. 123-5-1 of the Commercial Code). 111. The pursuit for profit of an economic activity of any kind by any person who intentionally fails to fulfil a registration requirement or fails to make mandatory declarations to social security organisations or to the tax administration constitutes the offence of concealed work, punishable by three years’ imprisonment and a fine of EUR 45 000 maximum for natural persons and a fine of EUR 225 000 maximum for legal persons (articles L. 8221-3 et seq., articles L 8224-1 and L. 8224-5 of the Labour Code and article 131-38 of the Penal Code). Making a false declaration also constitutes forgery, a criminal offence under article 441-1 of the Penal Code. 112. If the required declarations to the tax administration are not made, the penalties provided for at article 1728 of the Tax Code apply, including an 80% tax surcharge in the event of concealed activity. That is the case, for example, in the event of failure to register a French fiducie.50 Taxpayer com49.

50.

The omission from the memorandum and articles of association of a public limited company of the declaration relating to the distribution of the capital shares among all the partners, the paid-up status of the shares or the depositing of the funds carries a penalty of two years’ imprisonment and a fine of EUR 9 000 (article L. 241-1 of the Commercial Code). Article 1728, paragraph 1: “Failure to produce within the given time-limit a tax return or a document indicating the amounts needed to calculate the base or

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38 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION pliance is very high in France, since 98% of income tax returns and 99.5% of corporation tax returns are received without a reminder. 113. Ultimately, available sanctions appear to be sufficiently dissuasive to ensure the effective enforcement of the provisions. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating [To be finalised as soon as a representative subset of Phase 2 reviews is completed.]

A.2.Accounting records Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.

114. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. Accounting records must (i) correctly record all transactions, (ii) be such that the financial situation of the entity or arrangement may be determined with reasonable precision at any time, and (iii) enable the preparation of financial statements. Accounting records must be supported by underlying documentation such as invoices, contracts, etc., be detailed and be kept for at least five years. The sources of French accounting law are the Commercial Code, the National Accounting Code (Plan Comptable Général)51 and the Tax Code.

51.

assess the amount of tax shall entail the application to the amount of tax payable by the taxpayer or arising from the tax return or document filed late of a surcharge of: (a) 10% if notice has not been served or if the tax return or document is filed within thirty days following receipt of notice, served by registered letter, to produce it within such time; (b) 40% where the tax return or document has not been filed within thirty days following receipt of notice, served by registered letter, to produce it within such time […]”. The National Accounting Code is defined by Accounting Regulation Committee Regulation 99-03, approved by the Budget Minister. It codifies how accounts are to be kept with the aim of setting general rules for all firms or a category of firms. The Code aims to gradually standardise accounting systems.

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General requirements (ToR A.2.1) 115. French accounting rules apply to all traders (individuals, partnerships and companies) and all private legal persons who, while not being traders, have an economic activity or are above a certain size. Annual accounts must be accurate and honest, and present a true image of the assets of the corporation, of its financial position and profits. The rules described below thus apply to all companies (SARL, SA, SAS, SCA) and commercial partnerships (SNC and SCS) as well as to all entities having an economic activity. Professional trustees are covered by these obligations. 116. In accordance with the Commercial Code, all traders must “enter in their accounts the movements affecting the assets of their undertaking”. They must make an annual inventory of their assets and liabilities which, with their accounting records, is used to prepare annual accounts (article L. 123-12 et seq.). The accounts must be kept in accordance with the ordinary rules for double-entry book-keeping.52 117. Commercial entities and sociétés civiles beyond certain thresholds53 must prepare annual accounts, drawing up a balance sheet, income statement and notes for the purpose of precisely determining the company’s financial situation and issuing its financial statements. The balance sheet describes separately the company’s assets and liabilities and clearly indicates owner equity and, as applicable, other capital funds (article 130-2 of the National Accounting Code). It is a snapshot of the company’s assets and liabilities and of the result of its activity. The income statement recapitulates expenditure and income for the financial year, irrespective of their date of payment or receipt. The notes to the accounts provide explanations, breakdowns and appropriate documentation to shed light on the balance sheet and income statement. These documents must be honest and truthful and ensure a fair representation of the assets, financial situation and results of the undertaking (article L. 123-14 of the Commercial Code). Most of the rules for these documents also apply to fiducies.54 52.

53.

54.

In the double-entry system, every transaction or change recorded in the accounting system is to be represented by an entry establishing an equivalence between respective debits and credits to the various accounts affected by the entry (Article 420-1 of the National Accounting Code). Under Article L. 612-1 of the Commercial Code, sociétés civiles engaged in an economic activity that have more than 50 employees and more than EUR 3.1 million net of tax in sales or a balance-sheet total of EUR 3 155 000 or more must draw up a balance sheet, income statement and notes each year in the same way as traders (Article R. 612-1 of the Commercial Code). Under the Fiducie Act, trustees must prepare the annual accounts of the fiducie in compliance with Articles L. 123-12 to L. 123-15 of the Commercial Code in the

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40 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 118. The annual accounts (and, where relevant, the statutory auditor’s report) of SARLs and SAs must be put to the shareholders’ meeting for examination and approval. In the month after they have been approved, they must be filed at the court registry for annexing to the trade and companies register (where they can be consulted by third parties). The same rules apply to partnerships whose members are SARLs or SAs (articles L. 225-100 and L. 232-1 to L. 232-6 of the Commercial Code). 119. In the case of general partnerships (SNC) and limited partnerships (SCS), the annual report, inventory and annual accounts drawn up by managers are submitted for approval to the annual general meeting of members within six months of the end of the financial year (articles L221-7, L222-2 of the Commercial Code). 120. Small companies must also maintain accounting books and records. They may use a simplified presentation of their annual accounts if, at yearend, they do not exceed two of the following thresholds: a balance sheet total of EUR 267 000, sales net of tax of EUR 534 000 or 10 permanent employees during the year (articles L. 123-16 and R. 123-200 et seq.).55 121. In addition, the transactions of all commercial entities (and all individual traders) must be recorded in books: ‡

55.

a journal that records transactions affecting the undertaking’s assets and liabilities, daily and transaction by transaction (article R. 123174 of the Commercial Code and article 420-4 of the National Accounting Code). Each accounting entry must state the origin, content and attribution of each item together with the references to its supporting documentary evidence;

same way as companies. The General Chart of Accounts also applies to fiducies, with the exception of certain specific provisions contained in a regulation issued by the Accounting Regulation Committee. The simplified balance sheet includes: 1° Under-current assets: Intangible assets, distinguishing goodwill, tangible and financial assets; 2° Under current assets: stocks and work in progress, the Advances and prepayments, receivables distinguishing customers, investment securities and cash, 3° prepaid expenses; 4° equity ; 5° Provisions, 6° distinguishing debt: loans and similar debts, advances and deposits on orders and suppliers; 7° deferred revenue. The simplified income statement shows, in addition to changes in inventory: 1° Operating expenses distinguishing between purchases, other external charges, taxes, fees and similar payments, except tax benefit the remuneration of staff and managers, payroll and depreciation and amortization, impairments and provisions relating to the operation, 2° The financial charges; 3° Special charges, 4° The tax on profit; 5° Revenues distinguishing sales of goods, the production sold and operating subsidies; 6° financial products, 7° exceptional products.

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‡

a ledger summarising all the accounts opened by the undertaking according to the needs of its activity (article R. 123-175 of the Commercial Code). Journal entries are posted to the ledger;

‡

an inventory journal that records all the entity’s assets and liabilities, stating the quantity and value of each one at the inventory date; and

‡

a document describing the accounting procedures and organisation, if it is necessary in order to understand the accounting system and to monitor the data processing system (articles R. 123-172 to R. 123-177 of the Commercial Code and articles 410-2, 410-6 and 410-7 of the National Accounting Code).

122. The accounting books of persons that are not considered as “traders” are annexed to the Trade and Companies Register (article R.123-111 of the Commercial Code). 123. Sociétés civiles must also comply with accounting obligations. Those that are liable to corporation tax or whose operations are such that they may be liable to sales taxes must keep accounts so that they are able to provide the administration with the information required by the Tax Code (article 286, and article 37 of Annex 4). The members of other sociétés civiles are personally liable to tax on the portion of corporate profits corresponding to their corporate rights and must be able, where the amount of such portion is determined according to the société’s real profit, to provide the relevant information to the administration. That implies, at least de facto, keeping accounting documents backed up by supporting evidence.56 Some sociétés civiles must also comply with specific accounting rules under a regulated chart of accounts (sociétés civiles de placements immobiliers, sociétés coopératives agricoles, sociétés civiles professionnelles de notaires). 124. Lastly, as a general rule, any physical or corporate person who derives profits from his activity57 is required to pay corporate tax or income tax. Accordingly, regardless of the nature of his activity (i.e. whether it is commercial or non-commercial) and irrespective of the accounting requirements described above, every year that person must deposit a declaration proving details of the calculation of his taxable income and must be capable of providing the tax administration with evidence of all the elements taken into account to calculate this outcome. 125. Consequently, with regard to the legislation relating to accounts and tax requirements, France ensures the availability of accounting information 56. 57.

Ministerial answer to a question from Mr. Estève, Senate Official Journal, 12 March 1962, p. 60. This provision only applies to persons receiving salaries, pensions, life annuities or income from movable capital.

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42 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION allowing all transactions to be accurately tracked, the financial position of all entities to be established, and the preparation of the financial statements of all the relevant entities.

Underlying documentation (ToR A.2.2) 126. As mentioned above, entries in the journal must state the references of the supporting documentary evidence (articles 420-2 and 420-6 of the National Accounting Code). Each voucher must be dated and established on paper or by another medium ensuring reliability, retention and clear reconstruction of its contents. A company’s accounting system must also be organised in such a way that account items, statements and information subject to examination can be reconstituted from supporting documents evidencing the data entered and vice versa (articles 420-2 and 420-3 of the National Accounting Code). 127. The French authorities indicate that supporting documentary evidence may be, for example, public instruments, private instruments, brokers’ slips, accepted invoices, correspondence, duplicate invoices (evidencing sales) and duplicate pay slips (evidencing wages). 128. As France is an EU Member State and hence part of the intra-community VAT system, French undertakings must fulfil specific requirements regarding documentary evidence of transactions performed. Inter alia, they must keep all documents from which intra-community flows of goods and services can be traced, and, more generally, all invoices. 129. These various requirements ensure that the accounting requirements of French firms include the requirement of keeping supporting documentary evidence for the transactions performed.

5-year retention standard (ToR A.2.3) 130. Commercial entities and fiducies must keep accounting documents and supporting documentary evidence for ten years (article L. 123-22 of the Commercial Code). 131. The Tax Procedures Code also provides that books, registers, documents and other instruments with regard to which the administration may exercise rights of information-gathering and control must be kept for six years from the date of the last transaction mentioned in the books or registers or from the date at which the documents or instruments were drawn up (article L. 102B). 132. The Tax Procedures Code, implementing Directive 2006/112/EC on VAT, states that invoices issued by taxpayers or by their customer or, in their

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name and on their behalf, by a third party, as well as all the invoices that they have received must be stored in France, when the storage is not by electronic means guaranteeing immediate, full online access to the data concerned. If the information is stored outside France, the taxpayer must inform the administration where it is stored and may not store invoices in a country not bound to France by an agreement providing for mutual assistance and for a right to immediately access online, download and use all the data concerned (article L. 102C). Otherwise, article R. 85-1 of the Tax Procedures Code states that companies liable to corporation tax must keep all accounting documents at the disposal of tax officials. 133. The tax and accounting requirements imposed by French law mean that the 5-year retention standard for accounting information is complied with.

Implementation of the legal framework and practical aspects 134. In practice, many of France’s treaty partners have asked France for accounting information and this type of information (accounting documents and underlying documentation) accounts for 47% of requests from France’s five main partners. The underlying accounting documentation exchanged includes contracts and information relating to payments between a French company and a resident in the partner jurisdiction, prices of goods, invoices issued by French companies and how they are paid. The partners have indicated, inter alia, that some requests were triggered by a spontaneous exchange of information by France. 135. None of France’s treaty partners has indicated that they have not received accounting information they had requested because it was not available. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating [To be finalised as soon as a representative subset of Phase 2 reviews is completed.]

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A.3. Banking information Banking information should be available for all account-holders.

136. Access to banking information is of interest to the tax administration only if the bank has useful and reliable information about its customers’ identity and the nature and amount of financial transactions. 137. In France, banking information is kept by the banks themselves. Some information, like the payment of income from transferable securities, is also automatically transmitted to the tax administration at regular intervals and incorporated into the administration’s databases. In practice, bank information represents 40% of all information sent by France to its five main EOI partners.

Record-keeping requirements (ToR A.3. 1) 138. The chapter of the Monetary and Financial Code on combating money laundering and terrorist financing (articles L. 561-1 to L. 561-45) imposes know-your-customer obligations on banks and requires them to keep documents relating to transactions performed by their customers for five years. These obligations also apply to their foreign branches and subsidiaries (article L. 561-34). 139. The tax administration itself possesses a certain amount of banking information automatically provided by banks in their capacity as declaring third parties.58 That occurs, for example, when a bank account is opened, modified or closed (article 1649A of the Tax Code).59 This information is entered into the tax administration’s Bank Accounts Database (Fichier des Comptes Bancaires, FICOBA), which gives the tax administration a list of all bank accounts held in France by individuals or legal persons, whatever their jurisdiction of residence.60 The French tax administration uses the database for research, control and collection purposes. It also enables the competent authority to respond promptly to a certain number of information requests. 140. The same rule requires individuals, associations and non-commercial entities domiciled or established in France, when they file their tax return, to 58. 59. 60.

Declaring third parties are persons who declare income they pay to other persons to the administration. They are typically employers and banks. Payment of income from transferable securities is another example where banks automatically transmit information to the administration (see the section on bearer shares above). Anonymous accounts and accounts in a fictitious name are prohibited (Article L. 561-14 of the Monetary and Financial Code).

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declare accounts opened, used or closed in other jurisdictions (article 1649A of the Tax Code and L. 152-2 of the Monetary and Financial Code), subject to a fine of EUR 750 per undeclared account (article L. 152-2 of the Monetary and Financial Code).

Banking information requests in practice 141. In practice, many of France’s treaty partners have indicated they have received the banking information requested. The requested information ranges from the assets owned by an individual to copies of financial statements and account statements, transaction statements, signatures on accounts, documents relating to bank loans, copies of cheques, fund transfers and deposit receipts. France exchanges copies of original documents. 142. Several European partners have pointed out that they receive banking information from France through automatic exchange of information under the Savings Directive. Consequently, either they have not had to submit requests for specific information or the requests they have submitted to France have arisen mostly as a result of information received via the automatic exchange. 143. France has on occasion turned down requests for banking information, in particular when it has not been possible to find the individual concerned due to incomplete information despite a request for additional information from the French authority. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating [To be finalised as soon as a representative subset of Phase 2 reviews is completed.]

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B. Access to Information

Overview 144. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether France’s legal and regulatory framework gives the authorities access powers that cover all relevant persons and information and whether rights and safeguards are compatible with effective exchange of information. It also assesses the effectiveness of this framework in practice. 145. The French authorities have many sources of information for identifying the ownership of legal entities, including annual statements filed by taxpayers, automatic third-party declarations, the Trade and Companies Register (Registre du commerce et des sociétés) and other databases. The competent authority can thus respond to nearly 40% of information requests received without resorting to its information gathering powers. 146. The French authorities make use of their powers available for domestic taxation purposes in order to exchange information. The French tax administration has broad powers of access to accounting and banking information and to data on the ownership of legal entities, pursuant to the Tax Procedures Code (Livre des procédures fiscales, LPF). In particular, these powers allow the authorities to request information from any taxpayer and from third parties who may have the information sought, in order to determine the amount of income in question or to confirm the information contained in declarations. Banking secrecy is lifted in tax matters. 147. There are enforcement measures available to compel the disclosure of information, but they very rarely need to be used. This legal framework allows the tax authorities to collect the information requested by their

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48 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION partners, and no problems of application in practice have been detected over the last three years.

B.1. Competent authority’s ability to obtain and provide information Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).

148. The central competent authority for handling EOI requests received by France is the General Directorate of Public Finance (Direction générale des finances publiques, DGFIP) responsible for tax administration within the Ministry of Budget, Public Accounts, the Civil Service and Reform of the State (Ministère du Budget, des Comptes publics, de la Fonction publique et de la Réforme de l’État), and more specifically the international affairs office (Bureau des affaires internationales) of the tax examination branch (Sousdirection du contrôle fiscal, CF3). 149. Treaties override laws (article 55 of the Constitution). Consistent with the jurisprudence of the Court of Cassation and the Conseil d’État (the highest civil and administrative jurisdictions in France), tax treaties and TIEAs are directly applicable to collect information in response to a request.61 The tax administration relies on the domestic information gathering powers granted by the LPF. 150. The French authorities advise that the competent authority (CF3 or the attaché fiscal, as appropriate) will respond directly to around 40% of EOI requests received, drawing on information contained in the databases to which it has direct access, such as Infogreffe, but mainly its own databases. For example, it is possible to take a natural person and identify all his/her assets (real estate, securities, etc.), and likewise, in the case of a corporate person, the administration can immediately determine the identity of the owners (in most cases). Among these databases are: ‡

61.

Transparence Structure Écran (structure transparency screen, TSE) is a tool for identifying shareholders/partners, enabling the tax administration to recreate shareholder/manager links between natural or legal persons and entities. For a given entity, TSE provides identification data for the manager(s) and the shareholders/partners and the name

Conseil d’État: Nicolo ruling of 20 October 1989 ; Cour de Cassation: Société Cafés Jacques Vabre ruling of 24 May 1975. See footnote No. 2 for the text of article 55 of the Constitution.

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of any other undertakings of which the entity is itself a shareholder/ partner. A hypertext link for each item of information gives access to the data of the named individuals or legal persons, making it possible to identify the individuals concealed behind shell companies and to track informal groups. ‡

The Base Nationale des Données Patrimoniales (national assets database, BNDP) contains information drawn from instruments and declarations relating to assets, such as articles of association, changes to share capital, windings-up, mergers, business transfers and business pledges. From the information, it is thus possible to find out a company’s assets.

151. For the remaining 60%, CF3 sends the EOI requests to the local or national tax office with which the person concerned is registered. This may be either a management unit or a control unit, depending on whether the corporation or individual concerned is under examination at the time the request is received. It is these units, then, subsumed under CF3, which apply the tax administration’s droit de communication (see also section C.5.2 of this report for a discussion of the organisational process). 152. To obtain information it would not already have in its databases, the tax authorities may use its information gathering powers, primarily the droit de communication (variously translated as “right of discovery” and “power of disclosure”). The administration may also use the droit de contrôle (tax examination). Consequently, the French administration has access to information on the ownership of entities and on accounting and banking data.

Ownership and identity information (ToR B.1.1) The droit de communication (power of disclosure) 153. Information on the ownership of enterprises (companies, partnerships) and sociétés civiles (non-commercial entities) are often already in the tax administration files from when companies are registered and update the submitted information, and also when these entities submit their annual mandatory declarations. All this information is maintained and update in the databases of the tax administration in real time, including information on fiducies kept by the national registry of fiducies, managed by the tax administration. 154. If more detailed information is requested from the competent authority, it may use its droit de communication. Article L81 of the LPF establishes the droit de communication: it allows officials to inspect the documents and information mentioned in selected articles of the LPF, for purposes of establishing the tax base and controlling taxes, under the conditions specified therein. The persons covered by these articles are taxpaying “traders” (i.e. businesses), sociétés civiles and fiducies, as well as persons who pay

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50 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION fees, copyright royalties or salaries to taxpayers, other public administrations, establishments subject to supervision by the administrative authority (including banks and foundations), lawyers, notaries, etc. It should be noted that there is no legislative or regulatory provision restricting the period during which the droit de communication may be exercised. 155. With respect to information on the ownership of entities, LPF article L85(2) applies the droit de communication to records on the transfer of shares and bonds. The tax administration may also request corporate documents from sociétés civiles (article 94A). 156. The competent authority also has droit de communication over other public authorities such as the clerks of the commercial courts (on the basis of article L83), notaries who serve as depositories of articles of association (article L92), and the bank with which any person – either natural or legal person – holds an account (article L83). 157. In the case of fiducies, all information on the fiducie must be reported to the tax administration upon request, and professional secrecy may not be invoked (article 15 of Law 2007-211 of 19 February 2007 establishing fiducies).62 Moreover, LPF article L96F provides that any person exercising decision-making power over the fiducie must communicate to the tax administration, upon request, any document concerning the fiducie contract, and the secrecy obligation established in article 226-13 of the penal code may not be invoked. 158. The droit de communication is exercised either by sending a letter or by having a tax agent visit the company’s headquarters to inspect the documents directly. The company (or individual trader) is required to make copies of the documents and give them to the agent (LPF article R81-4). 159. As concerns natural persons not already covered above, the administration can request clarification, i.e. using its authority to require any taxpayer to provide, within 30 days, information, justification or clarification relating to a signed tax return (LPF article L10(3)). A refusal to provide information may be taken as grounds for a tax examination. Given the administration’s other options for obtaining information, this situation does not prevent France from responding to requests for information. 160. A refusal to disclose documents covered by the droit de communication is punishable by a fine of EUR 1 500 (regardless of the LPF article invoked, article 734 of the Tax Code). 62.

This obligation applies to fiduciaries and to the founders and beneficiaries of French fiducies, as well as to any person exercising decision-making powers, directly or indirectly, over the fiducie. Such persons must keep all information relating to the fiducie for a period of 10 years after the end of the fiducie contract.

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Practical application of the droit de communication 161. In view of the comments received from France’s EOI partners, there appear to be few requests for information on the ownership of French legal entities. As the main EOI partners of France are other states of the European Union, where France has posted tax attachés or where cross-border agreements apply, these requests for information are dealt with by them. 162. In practice, the French authorities have never had to address a case where the information requested could not be found in their own databases or gathered from persons listed under LPF articles L81 ff. The French authorities have never been confronted with a refusal to disclose documents.

Accounting records (ToR B.1.2) Droit de communication 163. In France, companies provide each year to the tax administration, a statement of earnings in a set of the approximately fifty tables attached to their tax return (known as the liasse fiscale or “tax package”), which includes profit and loss accounts, balance sheet of assets and liabilities. Many companies also file their annual accounts with the greffe (clerk), and these are accessible to the tax administration. Other accounting documents are retained by the entity itself, and in responding to an EOI request the competent authority will exercise its droit de communication. 164. The tax administration has a droit de communication specifically relating to accounting information. Articles L85 and L94A, governing traders and sociétés civiles,63 provide for the disclosure of accounting documents. Article L85 covers not only the books that must be kept pursuant to articles L123-12 to L123-28 of the Commercial Code but also all the related books and documents, including revenue and expenditure vouchers. Accounting information can also be requested from some third parties, such as the court registries (greffe), which receive the annual accounts of some entities (article L83). 165. When it comes to fiducies, as noted above, these are required to provide the tax administration, upon request, with any information “relating to the fiducie”, which includes accounting information (article 15 of Law 2007211 establishing fiducies).64 63. 64.

Article L94A targets the accounting documents of sociétés civiles, when they exist, and other revenue and expenditure vouchers they may hold relating to their business. LPF article 96F requires the disclosure of any document “relating to the fiducie contract”, but this may not cover accounting documents. The tax authorities

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52 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 166. As for documentation on the ownership of entities, the tax authority may either request accounting information by mail or send an officer to copy the documents in paper or electronic format. The droit de communication is a point process limited to the passive taking of information (obtaining copies of documents). The tax authority may also request clarifications.

Tax examinations 167. The purpose of a tax examination is not to respond to a request for information, even thought the authorities could use it for such purpose. There are cases where particularly complex requests for information lead the French authorities to conduct a tax examination, if deemed appropriate. More generally, when a French tax examination is being performed on an entity or person concerned by a request for information, the auditor in charge of the examination will be advised of the EOI request and will seek the requested information in the course of the examination, whether this involves an accounting review or a search (see below section B.1.4). 168. The accounting review (vérification de comptabilité) stipulated in LPF article L13 involves an on-site examination of a company’s accounts and a comparison with existing data in order to verify the accuracy and honesty of the declarations submitted. The audit covers the returns made over the last three to ten years, depending on the circumstances. As this procedure entails consequences that may be more serious than a droit de communication, i.e. a tax adjustment, it also triggers supplementary guarantees for the taxpayer, including assurance that the company’s accounts will not (as a general rule) be examined more than once for the same time period and the same tax (LPF article L51). 169. If an accounting review is ongoing, but some elements requested by an EOI partner are older than three years, the French authorities use the droit de communication to obtain them. Similarly, if France receives a request for accounting records concerning an entity that has been the object of an accounting examination, this does not prevent the competent authority from applying the droit de communication.

Frequent application of the droit de communication 170. Accounting records are among the most frequently requested documents: they account for 47% of information requests from France’s five principal EOI partners. The comments received from other partners of France confirm that they also make frequent requests for accounting information or documentation substantiating the accounts. One partner said it had received make use of the broader provision, i.e. article 15 of the law of 2007.

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authenticated copies as well as the originals of accounting documents. France reports that it is very rare for a company to refuse to provide documents requested under the droit de communication, and the few such cases have triggered a tax examination. Moreover, there has never been a case where another public administration has refused to communicate information to the tax authority.65 171. The French authorities have sometimes used their power pursuant to article L10 to demand clarification when the documents requested were not covered by the droit de communication, such as when one partner requested the transmission of memos and briefings from the internal meetings of a company.66 The documents were supplied by the persons concerned. 172. The competent authority in France has occasionally used the accounting review procedure, most frequently when a French tax examination was already underway, but also, occasionally, to respond to a request for information when the request could not be satisfied by the mere copying of documents for example. A few cases of non-response to a droit de communication have also triggered a tax examination, as a result of which the documents requested have been collected and transmitted to the requesting authority. 176. As indicated in section A.2 on accounting, France has responded to all requests for accounting information received over the last three years, apart from one case for which partial information was provided to the requesting partner.

Information exchange in the absence of domestic interest (ToR B.1.3) 177. The concept of “domestic tax interest” describes a situation where a contracting party to a tax treaty or TIEA can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. 178. French legislation does not contain any such restriction limiting the use of domestic information gathering powers for the purposes of the French tax administration.

65. 66.

The competent authority does not always exercise its droit de communication directly vis-à-vis the company concerned. In at least one case it requested and received information on a company’s accounts from the customs service. Documents of this type can also be obtained in the course of an on-site search (See B.1.4).

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Enforcement powers (ToR B.1.4) Sanctions for non-disclosure 179. Refusal on the part of a person covered by the droit de communication to disclose documents requested by the administration results in liability for a fine of EUR 1 500 (CGI article 1734). Moreover, any deliberate attempt by the taxpayer to prevent the tax administration from exercising its functions constitutes a criminal offence punishable by a fine of up to EUR 25 000.67 In addition to the fine, a taxpayer who refuses to co-operate may be subjected to a tax examination.

Search and seizure 180. The on-site inspection procedure, authorised and overseen by a judge (also known as a “tax search”) is intended to gather proof in certain serious cases of fraud that are exclusively of a tax nature (LPF article L16B).68 This procedure allows the authorities to inspect all premises, even private premises, and to seize all documents (copies of computer files, hard drives, etc.) that might reveal a suspected fraud, in particular those that would not be submitted in the context of an accounting review (double bookkeeping that might reveal the actual volume of business, exchanges of correspondence, e-mail messages or other messages between participants in the fraud, documents describing the fraudulent scheme, false invoices, etc.).

Use of enforcement measures 181. The competent authority in France has not needed, over the last three years, to impose a tax fine or to undertake a tax search in order to respond to an EOI request.

Secrecy provisions (ToR B.1.5) 182. France has various legal provisions imposing professional secrecy (on banks, lawyers, accountants, etc.), and any violation of that secrecy constitutes a criminal offence punishable by up to one year of imprisonment and a fine of EUR 15 000 (articles 226-13 and 226-14 of the Penal Code).

67. 68.

The notion of “difficulty” is not in itself sufficient. In the case of a repeat offense the court may also order a prison penalty of six months (CGI article 1746). When it comes to the VAT, the administration has a procedure for inspection without notice (droit d’enquête, LPF article L80) that allows tax officials to investigate violations of invoicing rules.

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Banking secrecy 183. All employees of financial institutions are covered by professional secrecy by virtue of article 511-33 of the Monetary and Financial Code, the breach of which entails the above-mentioned criminal penalties. However, banking secrecy cannot be invoked against the tax administration, which may apply its normal information gathering powers to banks just as it does to any other taxpayer. 184. Thus, pursuant to article L85 of the LPF, tax officials may require taxpayers, including banks and financial institutions, to disclose all their accounting records, as a well as the statements of private accounts of individuals or companies, and copies of the face and reverse sides of checks. 185. Pursuant to LPF article L83, the administration can also require banks69 to disclose internal documents that go beyond accounting records, such as proxy forms and specimen signatures (persons with powers of attorney over an account) or contracts for opening an account, any guarantees that may have been constituted (bonds or cash) in the context of setting up a loan or overdraft privileges, or vault visit records. The bank is not bound by any obligation of discretion and it may inform its customer of the tax authorities’ request for disclosure; the bank itself is not however advised of the reason for the request. 186. Lastly, pursuant to article L96A of the LPF and article L152.3 of the Monetary and Financial Code, the administration may require banks to disclose information on capital transfers by French residents to a foreign destination or to non-resident accounts for which they are the depositories. This information includes the date and amount of the sums transferred, the identity of the initiator of the transfer and of the beneficiary, as well as references for the accounts concerned in France and abroad.70

Other professional secrecy requirements 187. Among other legal provisions imposing professional secrecy in France are those involving the legal profession (see below), as well as accountants and auditors, for which the scope of secrecy is not defined by law.71 69. 70.

71.

Banks are “institutions or agencies of any kind subject to control by the administrative authority”. In addition to the criminal penalties of article 226-13 of the penal code, violations of the droit de communication stipulated in LPF article L96A are punishable by a fine equal to 50% of the undisclosed amounts, pursuant to GCI article 1740 bis. If the taxpayer can prove that there has been no loss to the public purse, the fine will be reduced to 5%, with a ceiling of EUR 750, for the first offence. This is generally the case in EOI situations. Article 21 of Ordonnance 45-2138 of 19 September 1945 for accountants; article L820-5 of the Commercial Code for auditors.

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56 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 188. The professional secrecy obligations of attorneys are defined by article 66.5 of Law 71-1130 of 31 December 1971, which covers the fields of legal advice and defence:72 “Regardless of the subject matter, whether advice or litigation, all correspondence exchanged between lawyers and clients and between lawyers and their colleagues (except where it is marked “official”), memorandums and, more generally, any documents on the file are covered by professional secrecy”. The expression “any documents on the file” covers, according to the case law developed by the Cour de cassation, handwritten notes of the attorney in preparation of a litigation and draft correspondence.73 189. This provision applies to independent attorneys and not to in-house legal counsels of companies. Secrecy does not apply to information held by lawyers as fiduciaries. Law 2007-211 of 19 February 2007 establishing fiducies (article 15) and LPF article L96F, in fact expressly waive the obligation of professional secrecy for fiduciaries, regardless of their profession (banker, lawyer etc.). 190. When the tax administration exercises its droit de communication, lawyers, accountants and auditors are required to provide information on attorney-client transactions between themselves and the company (LPF article L86). In addition, pursuant to LPF article 13OA, the tax administration may ask these professionals any information in relation to the amount, date and type of payment concerning their professional earnings, whatever their nature. The lawyer and the accountant cannot provide information that does not specifically relate to them or that they do not hold, for example a customer’s accounts held by an accountant. French law requires that such information is kept by the companies themselves and not by these professionals. The tax procedure law provides that businesses, and not these professionals, must make this information available to the administration.

Professional secrecy has no practical impact 191. In practice, professional secrecy has never been an obstacle to an exchange of information. This reflects the fact that secrecy is waived visà-vis the tax administration (for banks), on one hand, and the fact that the information in the possession of persons bound by professional secrecy is available through other channels in France (in the case of legal and accounting professionals).

72. 73.

The barrister and solicitor professions in France were merged 20 years ago. Except when lawyers are acting in a fiduciary capacity, professional secrecy applies to all their activities. Cass. com., 5 May 1998, Sté Value investing partners inc., appeal n° 96-30116.

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192. When it comes to banking information, several of France’s treaty partners said they had received the banking information requested (see section A.3). In practice, only a portion of the information was transmitted pursuant to the droit de communication as the French tax authorities have a great deal of banking information in their possession: they receive automatic reports (such as interest paid on customers’ savings accounts), and they also have access to a centralised database (FICOBA) listing the accounts held in France by natural or legal persons, whatever their place of residence. 193. In the case of banks, the droit de communication is exercised on site by specific units: the Brigade de recherche systématique (“systematic research brigade”) of the National Tax Investigation Division (DNEF) in Ile-de-France (Paris region) and the Departmental Inspection and Research Brigades, in the case of accounts held by banks outside that region. One DNEF representative interviewed during the on-site visit said he had never encountered a refusal to respond. The banks regularly submit the documents requested, either as originals or as photocopies. Naturally, the competent authority can exchange information contained in the FICOBA databases more promptly than information that must be obtained from the banks, and in the case of mixed requests, the French authorities may provide information in stages. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

B.2. Notification requirements and rights and safeguards The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

Rights and safeguards should not unduly prevent or delay exchange of information (ToR B.2.1) 194. No legal provision provides for the notification of the person who is the subject of an information gathering measure, including in the framework of EOI. Some tax treaties, and all TIEAs, allow for the disclosure of information received to the person concerned, but they do not require this.

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58 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 195. When the competent authority uses its droit de communication, the person concerned, if aware of the measure, may bring proceedings challenging whether the authority is acting within its power (in front an administrative court), although this proceeding does not have suspensive effect. The administration could provide the requested information in any case. No such proceedings have ever been brought in practice. However, the person concerned cannot challenge the sending of information to the foreign competent authority, since this person is not notified of this action.74 196. In practice, France responds to a great many EOI requests without advising the person concerned. If the information requested is not available in one of the databases to which the administration has access, it will be requested from the person concerned, but the competent authority will not reveal that the request flows from an EOI request. The French authorities indicated that they would authorise the foreign authorities to communicate their response to the taxpayer in the requesting jurisdiction. 197. In a few cases, in light of the great volume of information sought, the competent French authority has requested its treaty partner whether they could inform the person concerned about the existence of the request, in order to speed the information gathering process. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

74.

Conversely, when the French tax authorities receive information from a partner and it leads to a tax adjustment for a taxpayer taxable in France, he/she may challenge the re-assessment if the exchange of information has not complied with the treaty, laws and regulations providing for the exchange of information.

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C. Exchanging Information

Overview 198. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. A jurisdiction’s practical capacity to effectively exchange information relies both on having adequate mechanisms in place as well as an adequate institutional framework. This section of the report assesses France’s network of EOI agreements against the standards and the adequacy of its institutional framework to achieve effective exchange of information in practice. 199. France has a vast network of agreements with 142 jurisdictions containing provisions governing the exchange of information for tax purposes, and has embarked on an extensive drive to reform its treaties so as to bring the older ones up to international standards. The network covers all of Frances major economic partners, members of the European Union and of the OECD, as well as many financial centres and most members of the Global Forum. France has never refused to sign an EOI agreement with another member of the Global Forum. In practice, most of these instruments have not been used over the last three years for purposes of obtaining information from France: 80% of the requests recorded by France have come from other members of the European Union; Belgium, the United Kingdom and Spain alone account for more than half of these requests. 200. Among the instruments France has in place with its major partners, the treaty with Belgium is the only one that is not up to standard, as Belgium has not yet ratified the protocol allowing it to exchange banking information. 201. All EOI mechanisms and the French law include confidentiality provisions. These provisions apply equally to the information and documents contained in any request received by France as they do to the replies actually sent to the partner. Moreover, the treaties and TIEAs concluded by France guarantee that the parties involved will not be obliged to reveal information regarding an industrial, business or professional secret, or confidential

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60 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION communications between a client and an attorney, or to disclose information that would be contrary to public policy (ordre public). 202. One point has triggered some comments from France’s partners, on the timeliness of the responses. The French authorities rarely advise the requesting authorities of developments in the case when the processing of the request exceeds 90 days. Further, it seems that France could do more to strengthen its organisational process in order to reduce response times, for example by ensuring that the units responsible for gathering information respect the set internal deadlines.

C.1. Information exchange mechanisms Exchange of information mechanisms should allow for effective exchange of information.

203. France is party to EOI mechanisms of many types – bilateral, European Union and multilateral. France has signed 113 tax treaties, of which only two are not currently in force. France also signed 28 TIEAs between March 2009 and February 2011,75 and 16 of these are already in force (see Annex 2). 204. France is a party to the joint OECD/Council of Europe Convention, and a signatory to its 2010 protocol.76 205. France has bilateral treaties with all Member States of the European Union, except Denmark. However, information may be exchanged with Denmark through the provisions of Directive 77/79977 (or the joint OECD/ 75. 76.

77.

One TIEA, signed with Netherlands Antilles is now applicable to Curaçao and St Marteen. Convention on Mutual Administrative Assistance in Tax Matters, the parties to which are Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, the Netherlands, Norway, Poland, Sweden, Ukraine, the United Kingdom and the United States. This treaty will be consistent with the standard once the protocol will have entered into force. France is also a party to various bilateral treaties. When there are two or more instruments in force between France and a partner jurisdiction, as in this case, any discrepancy between the instruments will usually be settled by one of them. Thus, the above-mentioned convention provides (article 27) that the possibilities of assistance provided by that convention do not limit, nor are they limited by, those contained in any other international agreements. Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the member states in the field of direct

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COE convention). France is bound by Community law, in particular the Mutual Assistance Directive 77/799/EC, the Savings Directive 2003/48/EC and Community Regulation 1798/2003 on VAT. It should be noted that, pursuant to a ruling of the European Court of Justice, tax treaties (like any other domestic provisions), as an element of the domestic law of a Member State of the EU, must not be contrary to the requirements of Community law.78 If on the other hand the Directive is more restrictive than a treaty, the treaty will take precedence, pursuant to article 11 of the Directive, which states that its provisions do not affect the performance of broader obligations to exchange information as a result of other legal instruments. France can also exchange information with its EU partners on matters relating to income tax, wealth and VAT, on a basis of reciprocity, pursuant to LPF article L114A. 206. The Department for European and International Affairs of the Tax Policy Directorate is responsible for negotiating EOI instruments, while the International Affairs Office (CF3) of the Department of Tax Examination is the body responsible for handling requests for information. These two entities fall under the General Directorate of Public Finance. The French authorities have sought to optimise efficiency by locating the information exchange function within the most closely comparable domestic taxation area, i.e. tax examination. 207. The French authorities have adopted an administrative assistance manual relating to direct taxation, specifying certain interpretations to the rules and providing directives with respect to the exchange of information, although this is essentially focused on outgoing requests. Indeed, outgoing requests are handled in a decentralised manner: those tax offices that need information from abroad may request it through one of the units with delegated responsibility. 208. There is no need for the obligations deriving from tax treaties to be transcribed into domestic law in order for the tax authorities to exchange information, as those treaties prevail over French laws (Article 55 of the Constitution). Nevertheless, LPF article L114 stipulates that the competent authority may exchange information with its treaty partners, thereby relieving it of its professional secrecy obligation.79

78. 79.

taxation and taxation of insurance premiums. This directive is to be replaced shortly by a new directive that is consistent with the standard. Denmark terminated its tax treaty with France in 2008. Ruling of the Court of Justice of the European Communities of 12 May 1998, case C-336/96 (Gilly), which held that double tax conventions must not, like any other domestic provisions, run counter to the requirements of Community law. “The tax administration may exchange information with states that have concluded with France a convention on mutual assistance in tax matters for the exchange of

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Other forms of information exchange 209. In addition to exchanging information upon request, France exchanges information automatically and spontaneously. Automatic (or ex officio) exchanges are by far the most numerous, and more than two millions items are exchanged every year with 20 or so partners, as well as under the Savings Directive. This has an impact on the volume and nature of information requests: on one hand, exchanging information automatically reduces the number of requests by anticipating them. Automatic exchanges can also spark requests that would not otherwise have been made, if the information thus supplied allows a foreign tax authority to detect situations that deserve investigation. 210. Finally, France exchanges information spontaneously with its treaty partners. Without the need for a prior request, it transmits available information revealing the existence of income taxable in another jurisdiction, providing details on the wealth or lifestyle of a non-resident, or suggesting evidence that a fraud has been committed in the other state. As with automatic exchange, several of France’s partners indicated that the information sent spontaneously by France had led to requests for additional information. 211. Simultaneous tax examinations are possible within the European Union if several Member States have a mutual or complementary interest in the situation of one or more taxpayers. In this case each Member conducts an examination within its own territory and exchanges the information thus obtained. This procedure is used whenever such examinations appear more effective than separate investigations.80 212. France participated to 14 multilateral tax examinations in 2008 and 2009 and made 13 administrative investigations with foreign partners in 2009.

Standard of foreseeable relevance (ToR C.1.1) 213. The international standard for exchange of information envisages information exchange upon request to the widest possible extent. Nevertheless it does not allow “fishing expeditions”, that is to say speculative requests for information that have no apparent nexus to an open inquiry or investigation. The balance between these two competing considerations is captured in

80.

information with the French administration”, an expression which covers both tax treaties (DTC) and TIEAs. This provision also allows the exchange of information with the financial administrations of other subnational governments within France, under a specific tax regime, without the need for a signed treaty. Simultaneous audits mainly relate to VAT issues concerning multinational corporations (on the basis of EC Regulation 1798/2003), direct taxes (Directive 77/799) and excise duties (Directive 2073/2004).

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the standard of “foreseeable relevance” which is included in paragraph 1 of Article 26 of the OECD Model Tax Convention81 set out below: The competent authorities of the contracting states shall exchange such information as is foreseeably relevant to the carrying out of the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states or their political subdivisions or local authorities in so far as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 214. Only the most recent treaties contain the term “foreseeably relevant”. Most of the treaties signed by France employ the term “necessary”, others use the word “relevant” or “useful”. Pursuant to the commentary to Article 26 of the OECD Model Tax Convention, the terms “necessary” or “relevant” are considered equivalent to the expression “foreseeably relevant”. France confirms that it supports this interpretation and it extends it to the phrase “useful information” present in some treaties. 215. The protocol to the France-Swiss treaty which recently came into force replaces the article on exchange of information by an article consistent with the standard. It also inserts a point XI in the additional protocol to the treaty that fleshes out this article82 and lists the information that the requesting party must provide with its request for information, including the name and address of the person targeted by the examination or the investigation and, if available, any other element that might facilitate identification of the person (date of birth, civil register data, etc.). The French authorities indicate that they will answer to EOI requests of their partner as long as it includes any element allowing the identification of the person concerned. Similarly, the additional protocol specifies that the name and address of any person believed to be in possession of the requested information should be provided with the EOI request to the extent known. 216. The France-Bolivia treaty restricts the exchange of information to application of “the provisions of this Convention”. It thus excludes the exchange of information not related to a double-taxation situation. That treaty, therefore, does not conform to the standard. 81. 82.

OECD Model Tax Convention on Income and Capital, July 2010. Thus, according to the new point XI in the additional protocol, the reference to “foreseeably relevant” information is intended to ensure that the exchange of information in tax matters is as broad as possible, without allowing contracting parties to go on “fishing expeditions” or to ask for information that is unlikely to be relevant for clarifying the fiscal affairs of a given taxpayer.

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64 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 217. In practice, the French authorities apply the “foreseeably relevant” concept and its “fishing expedition” corollary in a reasonable manner consistent with the standard. They do not conduct any systematic, detailed verification of the justification of a request, unless the request differs from the requests usually received, or it contains particular elements that require the attention of the officer responsible for the request. Generally speaking, before responding or transferring the request to a specific tax unit, the competent authority verifies that the purpose of the request is clearly stated – for example, where there is an ongoing examination or serious grounds for considering one. 218. On a few occasions, France has refused to supply the information requested, on grounds of insufficient relevance, especially where requests concerned an undefined category of persons rather than identified individuals. Following explanations offered by France, the partners concerned have accepted this refusal and have reformulated their request or provided further details. France also refused to retrieve and transmit information to one partner on the grounds that the partner had not conducted an investigation before submitting the request. The jurisdiction concerned accepted this argument and reformulated its request after having conducted the required investigation.

In respect of all persons (ToR C.1.2) Residents and non-residents 219. For exchange of information to be effective it is necessary that a jurisdiction’s obligation to provide information is not restricted by the residence or nationality of the person to whom the information relates or by the residence or nationality of the person in possession or control of the information requested. For this reason the international standard for exchange of information envisages that EOI mechanisms will provide for exchange of information in respect of all persons and paragraph 1 of Article 26 of the OECD Model Tax Convention indicates that “the exchange of information is not restricted by Article 1”, which defines the personal scope of application of the Convention.83 220. Some French tax treaties do not contain this sentence. The article on information exchange nevertheless applies to residents and non-residents of the parties, to the extent that it applies to “the provisions of this Convention, or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention.” These treaties, then, do not limit EOI to residents of the contracting parties, because their domestic tax legislation applies to all taxpayers 83.

DTCs apply to persons who are residents of one or both of the Contracting States.

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(and to third parties, with respect to access to information), resident or not, (e.g. domestic laws also tax the domestic income of non-residents). Other treaties contain similar wording referring to domestic laws. Exchange of information in respect of all persons is thus possible under these treaties.84 The French authorities confirmed that they adhere to this interpretation. 221. The France-Bolivia treaty restricts the exchange of information to application of “the provisions of this Convention”. Because its first article restricts the application of the convention to residents of the contracting parties, this treaty does not allow exchange of information concerning nonresidents. On this point again, the treaty does not comply with the standard. 222. In practice, the competent authority seeks to determine, first, whether the person concerned is a French taxpayer, and if this is not the case it attempts to find the person concerned by using publicly accessible databases such as the telephone book or the civil status registry. The authorities pay just as much attention to requests concerning non-taxpayers as to those concerning taxpayers, as such a situation may conceal a case of tax fraud in France. In one case, France did not reply to an EOI request, on the grounds that the person concerned had no ties to France. In that case, a foreign authority had asked France to provide accounting records on the foreign subsidiary of a company resident in France. France indicates that in cases of this kind it considers that the requesting party should first seek information from the jurisdiction in which the foreign subsidiary is located, whenever possible, before turning to France.

Geographical scope of application 223. As indicated in the introduction, the French Republic comprises various territorial entities, and only the European and overseas département are covered by EOI instruments. Some of the older (and little-used) tax treaties do not cover the overseas département,85 while other treaties may not automatically cover Mayotte upon its accession to the status of département.86 Although these shortcomings have little practical impact, France is advised to update these treaties in the context of its treaty policy. 84. 85. 86.

Moreover, Directive 77/799 applies to some treaties, and contains no restriction on the persons targeted. Treaties with Malawi and Zambia, from 1953. These partners have never requested information from France, and the treaties are rarely used. The DTCs and TIEAs covering “Metropolitan and overseas départements” will apply automatically to Mayotte, but not the treaties (for example those with Benin, Brazil and Israel) that name the four existing overseas départements. The French authorities will need to take measures to extend application of these treaties to Mayotte.

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Obligation to exchange all types of information (ToR C.1.3) 224. French domestic law places no restriction on the exchange of information with partners. The competent authority may communicate any kind of information to its partners, even when the DTC does not contain paragraphs 4 and 5 of Article 26 of the OECD Model Tax Convention.

Banking information 225. Only the most recent French tax treaties87 contain a provision similar to Article 26(5) of the Model Tax Convention. However, the absence of this phrase in the other treaties does not automatically create restrictions on exchange of bank information. The commentary to the Model Tax Convention indicates that whilst paragraph 5 (added in 2005) represents a change in the structure of the article, it should not be interpreted as suggesting that the previous version of the article did not authorise the exchange of such information. 226. As French domestic law contains no restriction on the exchange of information, the competent authority exchanges banking information in the context of its tax treaties on a basis of reciprocity (paragraph 3 of the Model), i.e. when the domestic law of the requesting party allows, as does French law (see part B), for such information to be accessed and exchanged. 227. Austria,88 Belgium, Botswana and Lebanon are unable to access banking information for EOI purposes, in the absence of an explicit provision in their treaties (i.e. reciprocity does not apply). The French treaties with these jurisdictions are therefore not up to the standard, but France is in the process of amending them: A protocol with Belgium was negotiated in 2009 (and is now pending ratification by Belgium) and protocols have been initialled with Austria and Botswana. The treaties with Lebanon should also be amended. Finally, in Trinidad and Tobago access to bank information can only occur when there is an ongoing tax assessment and an objection to the assessment by the taxpayer.

87. 88.

Treaties with Australia, Bahrain, Germany, Japan, Kenya, Luxembourg, Malaysia, Malta, Qatar, Singapore, Switzerland, the United Kingdom and the United States. Austria, Belgium and Luxembourg are the three EU member states that were granted dispensation from the automatic information exchange mechanism under the Directive of 3 June 2003 on harmonisation of the taxation of savings. They are thus exempt from this automatic EOI obligation but, on the other hand, they must pay other member states an annual amount corresponding to a withholding tax on the savings income covered by the Directive. It should be noted, however, that Belgium has been exchanging banking information automatically under the Directive since 1 January 2010.

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Absence of domestic tax interest (ToR C.1.4) 228. The concept of “domestic tax interest” describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. An inability to provide information based on a domestic tax interest requirement is not consistent with the international standard. Contracting parties must use their information gathering measures even though invoked solely to obtain and provide information to the other contracting party. 229. Most of the tax treaties signed by France do not contain paragraph 4 of Article 26 of the Model Tax Convention, requiring contracting parties to use their information gathering measures to obtain the requested information, even though they may not need such information for their own tax purposes. The 20 TIEAs concluded by France contain a similar provision,89 as do the protocols recently signed, for example, with Switzerland, Belgium, Luxembourg and Bahrain. 230. When this paragraph was added to the Model in 2005, the intent was to make explicit an obligation that already existed in practice, and France is in a position, even without this paragraph, to exchange information with its partners without reference to any domestic tax interest. 231. Some treaties provide for the exchange of information “which the tax authorities have at their disposal” (Benin, Burkina Faso, Cameroon, Central African Republic, Ivory Coast, Mali, Niger, Morocco, Mauritania, Senegal, Togo). Differing interpretations are possible: either the exchange will be restricted to the information contained in the tax authority’s files (in which case a domestic tax interest requirement exists), or the exchange will cover all information to which the tax authority has access. The French authorities, for their part, favour the second interpretation.

Absence of dual criminality (ToR C.1.5) 232. The dual incrimination principle states that assistance can only be provided if the conduct being investigation (and giving rise to an information request) would constitute a crime under the laws of in the requested jurisdiction if it had occurred in that jurisdiction. In order to be effective, information exchange should not be constrained by the application of the dual criminality principle. 89.

The TIEAs provide that “if the information in the possession of the competent authority of the requested party is not sufficient to enable it to comply with the request for information, that contracting party shall use all relevant information gathering measures to provide the requesting party with the information requested, notwithstanding that the requested party may not need such information for its own tax purposes” (Article 5(2)).

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68 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 233. The French TIEAs provide expressly that the principle of dual criminality is not a condition for exchanging information.90 The tax treaties are silent on this subject (as is French law) and they therefore do not require the application of a principle of dual criminality. This question has never arisen in practice.

Exchange of information in both civil and criminal tax matters (ToR C.1.6) 234. Communicating information may be necessary for both tax administration purposes and for tax criminal purposes. The international standard provides for both types of procedures. 235. The EOI mechanisms concluded by France provide for the exchange of information for both criminal and civil purposes. The TIEAs make express provision to this effect in their article 1.

Providing information in a specific form requested (ToR C.1.7) 236. There are no restrictions in the information exchange mechanisms established by France that might prevent it from providing information in the form requested, as long as this is consistent with its administrative practices. The French TIEAs contain, in their article 5(3), a stipulation concerning the provision of information in a form specifically requested by a contracting party in order to meet its requirements for proof or other legal requirements, to the extent allowable under the law of the requested party. This may include depositions of witnesses and authenticated copies of original records.91 237. In practice the French authorities, when they receive such a request, will transmit the information requested in the form desired. However, they are not in a position to provide depositions from witnesses, as this possibility does not exist in French tax law.92 On the other hand, anything written or transmitted by duly sworn tax officials has the same value as a witness deposition or a certified copy, and can be used in court.

90.

91. 92.

The TIEAs provide that information must be exchanged “without regard to whether the requested party needs such information for its own tax purposes or the conduct being investigated would constitute a crime under the laws of the requested party if such conduct occurred in the requested party.” (Article 5(1)). The protocol to the treaty with the United States contains a similar provision. Taking of witness testimony involves a criminal, non-tax procedure.

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In force (ToR C.1.8) 238. Exchange of information cannot take place unless a jurisdiction has EOI arrangements in force. Where EOI arrangements have been signed, the international standard requires that jurisdictions take all steps necessary to bring them into force expeditiously. 239. Most of the French treaties, protocols and agreements are in force. Only 15 were not in force at 28 February 2011. These include the protocol with Belgium and a few recently agreements ratified by France that will come into force as soon as the other party has completed its domestic ratification procedures.93 240. It should be noted that, while French ratification may have taken a long time in the past, special efforts have been made in the last two years to speed up the process through better co-ordination of the authorities involved (Ministry of Finance, Ministry of Foreign Affairs, General Secretariat of Government) and presentation in batches to the Council of State (Conseil d’État) and Parliament, whenever possible. Once Parliament has adopted the ratification law, the President of the Republic promulgates it and the authorities of the other contracting party are informed through official channels.94 Today, the average time between the signature of an arrangement and its entry into force is 12 months (seven months for the latest ones that entered into force), and the only instruments pending ratification are those that were signed since September 2010. 241. The measures instituted to speed the entry into force of arrangements include arranging for signature by exchange of letters, particularly for TIEAs, as well as signature by ambassadors, but France’s partners do not always accept these forms of signature.

93.

94.

The arrangements waiting for France’s ratification are the protocol with Saudi Arabia (signed in September 2010) and the agreement with Hong Kong (China) (signed in October 2010), and the TIEAs with Anguilla, Belize, Brunei, Costa Rica, Curacao, Dominica, the Cook Islands and St. Maarten (signed in 2010), and Liberia (signed in 2011). The following TIEAs have been ratified by France only: Grenada, Turks and Caicos, and St. Vincent and the Grenadines. Pursuant to Article 53 of the Constitution, treaties or agreements committing the finances of the State may be ratified or approved only by an Act of Parliament virtue of a law.

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Effectiveness through legislation (ToR C.1.9) 242. For information exchange to be effective the parties to an EOI arrangement need to enact any legislation necessary to comply with the terms of the arrangement. Once a DTC or TIEA comes into force, France does not need to take additional measures to make it effective. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

C.2. Exchange of information mechanisms with all relevant partners The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.

243. France has a broad network of tax treaties and TIEAs covering all its significant partners. In particular, it has treaties with all its neighbours as well as with all members of the European Union. 244. France’s network is in fact not only one of the largest but also one of the oldest in the world. Today, the priority of the French authorities is to modernise the network by renegotiating agreements with France’s most important partners (protocols in force with the United States, United Kingdom, Japan, Germany, Switzerland and Luxembourg). 245. The treaty with Belgium is not up to the standard in terms of the exchange of banking information, as the protocol to that treaty has not been ratified by Belgium. 246. France has also renegotiated tax treaties that did not contain an EOI article (Qatar in 2008, Bahrain in 2009, and Saudi Arabia in 2010). Today only the negotiations with Oman are still ongoing. 247. As to those other treaties where EOI provisions are not up to the standard but where there has been no exchange of information in recent years, France is renegotiating their provisions as the occasion arises, i.e. when negotiations are necessary on other articles of the treaty. Examples are the

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treaties with Malawi and Zambia, concerning the geographic coverage of the agreements, or the one with Bolivia concerning persons covered by the treaty. 248. Since 2009 France has also sought to expand its network and it has offered to open negotiations with the jurisdictions that, according to the OECD Secretary-General’s progress report of 2 April 2009 on implementation of the internationally agreed tax standard, were not applying the international standard on transparency and exchange of information. All but one have responded to this offer and begun discussions. 249. In total, France signed 20 protocols, tax treaties or TIEAs in 2009, 16 in 2010 and two at the beginning of 2011. 250. In no case has a member of the Global Forum reported that, after contacting France in order to negotiate an agreement or a protocol, it received no response or a negative response. The French authorities confirm that they are willing to sign an EOI agreement with any jurisdiction that so requests, even if its economic ties with that jurisdiction are negligible. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

C.3. Confidentiality The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.

Information received: disclosure, use and safeguards (ToR C.3.1) 251. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protection afforded by the confidentiality provisions of information exchange instruments, tax jurisdictions generally impose strict confidentiality requirements on information collected for tax purposes.

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a) Provisions of EOI mechanisms 252. The provisions governing confidentiality are based on article 26(2) of the OECD Model Tax Convention (in its successive versions, depending on the date of signature of the treaty in question) or on article 8 of the Model TIEA, according to which “any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State”. 253. The majority of French treaties as well as Directive 77/799, the OECD/COE convention and all the TIEAs provide that the information obtained in the course of a request for assistance shall be accessible only to persons directly concerned with the assessment of the tax or the administrative control of that assessment. This term embraces taxpayers, their representatives, the tax administration, and judges of the tax courts. While an instrument may allow information to be disclosed to the taxpayer, it does not oblige the competent authority to do this. In fact, there may be cases where the information is given in confidence to the requesting party and the source of the information may have a legitimate interest in preventing its disclosure to the taxpayer (see chapter B.2 above). 254. Other bilateral treaties95 make information available to the persons “responsible” for tax assessment or administration. The information exchange will then be kept confidential vis-à-vis the taxpayers concerned. 255. The manual on administrative assistance in direct tax matters provides that, in the case of information received by France through administrative assistance and used to correct the tax situation of a taxpayer, he/she may submit a written request for communication of the documents received (except where the treaty used contains a restrictive clause preventing such a communication to the taxpayer). Where France is the requested party, nothing in the law requires the authorities to inform the taxpayer of the existence of an EOI request. In practice, the authorities never inform the taxpayer that he/ she is the subject of a request for information from an EOI partner. 256. All the TIEAs and some of the treaties signed by France provide for the possibility of communicating the information exchanged for other than tax purposes (for example, the protocol to the treaty with Bahrain, which is not in force)96 in accordance with article 8 of the Model TIEA and commen95. 96.

Primarily the older treaties, such as those with Benin, Brazil, Bulgaria, Burkina Faso, Cameroon, Estonia, Jamaica, Lithuania, Niger, the Czech Republic, Senegal. The conventions with Malawi and Zambia refer to “interested” persons. On the other hand, none of the French TIEAs provides for agreeing to disclosure of the information exchanged to the authority of a third jurisdiction, contrary to the model agreement. This discrepancy does not affect compliance with the

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tary 12.3 to the Model Tax Convention.97 Thus, the TIEAs all provide that “information provided to the competent authority of the requesting party may not be used for any purpose other than for the purposes stated in Article 1 without the prior express written consent of the requesting party”. The treaties use the formulation of commentary 12.3 to the Model Tax Convention: “Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use”.98

b) French law 257. Officers of the tax administration are subject to professional secrecy pursuant to articles L103 of the LPF and 226-13 and 226-14 of the Penal Code. 258. The obligation of professional secrecy in tax matters applies to all persons who, in the course of their duties, are involved in the assessment, supervision, collection or litigation of taxes, duties, levies or royalties. Secrecy extends to all information collected during such operations (LPF article 103). This rule allows for exceptions, primarily for the benefit of other French administrations and the judicial authorities, as well as the foreign competent authorities, on the basis of an EOI agreement (articles L113 ff). 259. The regulatory part of the LPF specifies that the information communicated through exceptions to tax secrecy must be the object of a prior request, with the exception of EOI. The information supplied is limited to the elements necessary to fulfil the missions for which it has been granted (LPF article R113.1). 260. Article 226-13 of the Penal Code punishes the disclosure of information covered by professional secrecy, including tax information, by one year of imprisonment and a fine up to EUR 15 000.

97.

98.

standard, as the competent authority always has the possibility of refusing to authorise disclosure of the information. Contracting States may wish to allow the sharing of tax information by tax authorities with other law enforcement agencies and judicial authorities on certain high priority matters (e.g. to combat money laundering, corruption, terrorism financing). Contracting States wishing to broaden the purposes for which they may use information exchanged under this Article may do so by adding a specific provision. Directive 77/799 provides moreover that a member state may disclose tax information received from another member state during judicial proceedings if the state supplying the information has raised no objection

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c) In practice 261. In practice, all communications with partners are treated as confidential by the French competent authority and the persons involved in collecting and exchanging information are fully aware of their obligations. 262. The competent authority has a computer programme for International Administrative Assistance that it uses for handling incoming and outgoing EOI requests relating to direct taxes, VAT, inheritance tax and collection of taxes. Officials receive access rights and user rights to this programme. Depending on their level of authorisation, users may access all the information or only a part thereof, as well as make changes to files. 263. In order to enforce secrecy provisions, the tax administration has prepared a charter for using information and communication technologies. This charter guarantees the security and proper functioning of the information system by establishing ethical principles for the use of computerised tools. Lastly, intra-Community exchanges are done via the common communication network (CCN Mail, with securitised mailboxes in all Member States). 264. No member of the Global Forum has raised doubts on the ability of the French authorities to respect the confidentiality duty nor has any case been reported where this duty was violated. The French authorities confirmed that they have never encountered a confidentiality problem in practice.

Other information exchanged (ToR C.3.2) 265. The confidentiality provisions contained in the applicable agreements and in French legislation do not make any distinction as to whether the information is received in response to a request or is part of the request itself. These provisions apply equally to requests, to the attached documents and to all communications between the jurisdictions involved in the exchange. Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

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C.4. Rights and safeguards of taxpayers and third parties The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.

266. The international standard allows requested parties not to supply information in response to a request in certain identified situations where an issue of trade, business or other legitimate secret may arise.

Exceptions to requirement to provide information (ToR C.4.1) 267. All French tax treaties ensure that the parties are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or information the disclosure of which would be contrary to public policy (ordre public),99 in a manner consistent with Article 26(3)(c) of the Model Tax Convention. The TIEAs signed by France contain similar provisions (based on those of the Model TIEA), with sometimes an express reference to the professional secrecy duties of lawyers (legal privilege),100 in which case the notion of legal privilege refers to Article 7(3) of the TIEA that allows to decline a request if it would reveal confidential communications between a client and an attorney. 268. In addition, the LPF prohibits the French administration from providing information which would disclose any business, industrial or professional secret or information the disclosure of which would be contrary to public policy (article R114A-2). 269. In practice, professional secrecy has never posed a problem, as all information relevant to EOI requests are obtained from taxpayers themselves. 270. France has invoked this clause only once in the course of the last three years, when it refused to respond to a request for information on the grounds of protecting the ordre public, in conformity with the standard. 99.

Some treaties with African jurisdictions, dating from the 1960s and 1970s, replace the term “ordre public” with a phrase indicating that “the assistance may be denied when the requested state considers that it might pose a danger to its sovereignty or its security, or would jeopardise its general interests” (Benin, Burkina Faso, Cameroon, Malawi, Mauritania, Niger, Senegal, Zambia) 100. Andorra, Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Turks and Caicos, Gibraltar, Guernsey, Isle of Man, Jersey, Liechtenstein, San Marino, Uruguay and Vanuatu. The TIEAs with Antigua and Barbuda, Grenada, the Cook Islands, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines contain a definition of legal privilege (consistent with the interpretation of paragraphs 2 and 4 of article 7, discussed in commentary 85 to the model agreement).

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76 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION Determination and factors underlying recommendations Phase 1 Determination The element is in place. Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed.

C.5. Timeliness of responses to requests for information The jurisdiction should provide information under its network of agreements in a timely manner.

Responses within 90 days (ToR C.5.1) 271. In order for exchange of information to be effective it needs to be provided in a timeframe that allows tax authorities to apply the information to the relevant cases. If a response is provided but only after a significant lapse of time, the information may no longer be of use to the requesting authorities. This is particularly important in the context of international co-operation as cases in this area must be of sufficient importance to warrant making a request. 272. Thus, jurisdictions should be able to respond to requests within 90 days of receipt by providing the information requested or offering an update on the status of the request. There is nothing in French law that would prevent the French authorities from responding to requests within 90 days of receipt, or at least providing a progress report concerning the procedure. 273. In practice, the French authorities respond by this deadline only sometimes; more significantly, they often fail to advise their partners of the status of their requests. Many partners indicated that, generally speaking, France does not advise the requesting jurisdiction of the status of the procedure when the response cannot be provided unless the requesting jurisdiction so requests expressly through a follow-up message. The French authorities agree that this is a shortcoming in their co-operation system and they already have plans to remedy it by instituting a computerised tracking programme (see below).101

101. On the other hand, France systematically sends an acknowledgment within 3 to 7 days after receipt of the request at the CF3 office; the absence of acknowledgment indicates that the request has not been received by the French authorities.

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274. The French authorities report that their response time to requests averages 145 days (in 2009; 159 days in 2008). This response time varies greatly, depending on the complexity of the request (the number of persons involved, the number of questions) and on whether the information is already in the tax administration’s databases or has to be obtained through the droit de communication. France’s customary partners have confirmed that response times vary with the complexity of their requests. Only one partner reported closing a case because of lack of response from the French authorities within 18 months of the request.

year

Information provided within 90 days

Information Information provided between provided between 91 and 180 days 181 and 365 days

Information provided in more than 1 year

2007

49.22%

32.25%

12.88%

5.65%

2008

41.85%

29.35%

14.40%

14.40%

2009

42.02%

37.08%

14.60%

6.30%

275. In the context of cross-border exchanges, France participates in yearly meetings to consider and assess practices that should be mutually adopted and pursued with each of its partners. For instance, the CF3 office meets annually with its Spanish counterpart to consider cases pending and to discuss those that present particular difficulties. An annual assessment is prepared in order to identify areas for improvement. 276. These meetings appear to be useful, as France’s major EOI partners are those that seem the most satisfied with response times. 277. Representatives of several agencies interviewed during the on-site visit showed a real interest in mutual administrative assistance and they seem to take particular care in handling any information request submitted by a partner. On the other hand, all felt that France’s response times were reasonable, and were in line with the average response times of their principal partners. It is apparent, however, that some organisational processes could be shortened.

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Organisational process and resources (ToR C.5.2) 278. Nearly all tax treaties and TIEAs designate the budget minister or his authorised representative as the competent authority.102 The “authorised representative” for incoming requests103 is the Office of International Affairs (CF3). As a general rule, CF3 receives requests for information whether they are based on a tax treaty, a TIEA, or a multilateral instrument. Some requests, however, are addressed to tax attachés posted abroad or in certain border regions, on the basis of delegation. 279. The CF3 office has eight people in charge of international administrative assistance (four persons for direct taxes and four for VAT matters). This office is part of the Department of Fiscal Control within the Tax Policy Directorate of the Ministry of Budget, Public Accounts and Reform of the State. Its position within the administration gives it hierarchical authority over all units potentially involved in gathering the information requested. 280. France has created six tax attaché posts in the capitals of its major partners as well as in North America, so that problems can be identified and resolved more promptly. Reporting to the CF3, they handle urgent or complex requests from the 12 jurisdictions to which they are assigned: Germany (Berlin); Belgium, Luxembourg and Netherlands (Brussels); United Kingdom and Ireland (London); Spain and Portugal (Madrid); Italy (Rome); and United States, Canada and Mexico (Washington). Since 2000, the tax attachés have been sending directly to the directorates concerned any spontaneous information and EOI requests in direct tax matters received from the respective foreign tax authorities. Once the request has been processed, the information gathered at the foreign authority’s request is transmitted directly by the requested directorate to the tax attaché for onward transmission to the foreign competent authority. Special attention is paid to complex issues such as tax fraud. 281. France has cross-border agreements in place, with Germany (2003), Spain (2004), and Belgium (2006). These agreements delegate authority to certain border directorates, allowing them to exchange information directly. This encourages informal contacts and better understanding among partners. France reports that these agreements have proven very useful, and that the number of requests handled in this manner has been growing steadily. The campaign against cross-border fraud, including cases involving small and very small entities, has thus been intensified. 102. Some of the older treaties (e.g. with Benin, Burkina Faso, Cameroon, Malawi, Niger, Senegal and Zambia) provide that information should be exchanged directly between tax authorities. 103. Responsibility for outgoing requests is decentralised, and various offices may send requests for information to France’s foreign partners.

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COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 79

282. To prevent confusion arising from the great number of potential interlocutors, the French authorities send to all their partners every year a list of the competent authorities, with contact information. This list is also published via the EU and OECD intranets.

Resources 283. In total, there are around 50 persons responsible for the exchange of information in France (covering both incoming and outgoing requests). These persons, as well as any officers who may be required to gather information to respond to a foreign request, receive regular training in international administrative assistance and are guided by a Manual of Administrative Assistance in Direct Taxation Matters (this in fact focuses primarily on outgoing requests, which are handled in a decentralised manner).104 English and Spanish courses are also offered and one partner was very pleased to receive the requested information together with an English translation. 284. More generally, for some years now the National School for Public Finances has provided a training session in international taxation (tax treaties, administrative assistance, etc.) for every senior officer. The intent is to make all officers, whatever their position, aware of international tax issues and the importance of administrative assistance. In a typical year some 500 new agents pass through the National Taxation School, where they are familiarised with information exchange before they take up their position.

Organisational process 285. The typical routing of a request is as follows: the competent authority (CF3) receives the EOI request, confirms its admissibility (legal basis cited, signature of the requesting authority) and acknowledges receipt. 286. If there is any ambiguity in the request, or if details essential to the search are missing (e.g. if the person concerned is not identified clearly enough to be located within the available databases), the competent authority will contact its requesting counterpart by post or e-mail, if the electronic address is given in the request, as noted by several partners. France is in fact a member of an EU working group that is creating a single request form to facilitate EOI in direct taxation matters (as already exists in VAT matters). 287. Within one week the CF3 decides whether to handle the request directly or to refer it to a management or control unit. Simple requests, such

104. The manual dates from 2007. It deals essentially with outgoing requests. It alerts agents to the need to respond promptly and carefully to any EOI request.

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80 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION as those involving a tax declaration or confirmation of residence, can be processed within the week. 288. All requests are recorded in a dedicated computerised application (AAI, “Assistance Administrative Internationale”) that can track incoming and outgoing requests (statistical data, unit responsible for collecting information, request processing times, reminders, etc.). 289. Requests that cannot be handled directly by the central authority are sent to the local directorates, which transfer the request to the competent operational unit. CF3 allows the unit 60 days to respond. All responses are provided in a standard electronic format, and documentary attachments are scanned. The representative of one control and research brigade said that, as a general rule, the processing time for a request in her brigade varied between three days and three months, depending on the complexity of the request and its clarity, with some partners explaining their requests better than others. 290. Responses are checked by the head of the local directorate before being sent on to the CF3 office, which again verifies the responses. The head or the assistant head of the team verifies that the elements necessary to the response have been properly transmitted and that the appropriate searches have been conducted. If there are shortfalls, supplementary searches are requested; otherwise, the responses are sent the next day to the requesting authority. Partial responses may also be sent, mainly in the case of European partners. 291. The computer application mentions the dates of the draft response from the decentralised authorities to the central administration. For the time being, reminders are not automated, but the French authorities are planning to integrate this functionality in the coming months.

Restrictions on the exchange of information (ToR C.5.3) 292. There is no provision in France’s legislation or in its EOI instruments that would impose conditions on the exchange of information beyond those contemplated in article 26 of the OECD Model Tax Convention or the Model TIEA. Nor does it appear that France has created any restriction on the exchange of information in practice. Determination and factors underlying recommendations Phase 1 Determination The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.

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COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 81

Phase 2 Rating To be finalised as soon as a representative subset of Phase 2 reviews is completed. Factors underlying recommendations

Recommendations

France rarely advises requesting jurisdictions of the status of their requests when the competent authority is not in a position to respond within 90 days.

France should promptly implement a system for advising requesting jurisdictions of the status of their requests when the competent authority is not in a position to respond within 90 days.

The competent central authority does not systematically send reminders to the tax units handling an EOI request when they do not submit their responses within 60 days.

France should promptly implement its plan to send automatic reminders to the units responsible for gathering information in order to optimise response times.

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SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 83

Summary of Determinations and Factors Underlying Recommendations Determinations

Factors underlying recommendations

Recommendations

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1) Phase 1: The element is in place Phase 2: The rating will be finalised as soon as a representative subset of Phase 2 reviews is completed. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2.) Phase 1: The element is in place Phase 2: The rating will be finalised as soon as a representative subset of Phase 2 reviews is completed. Banking information should be available for all account-holders (ToR A.3.) Phase 1: The element is in place Phase 2: The rating will be finalised as soon as a representative subset of Phase 2 reviews is completed.

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84 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS Determinations

Factors underlying recommendations

Recommendations

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. Exchange of information mechanisms should allow for effective exchange of information. (ToR C.1) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.

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SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 85

Determinations

Factors underlying recommendations

Recommendations

The jurisdictions’ network of information exchange mechanisms should cover all relevant partners. (ToR C.2) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3) Phase 1 determination: The element is in place. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4) Phase 1 determination: The element is in place. Phase 2 rating: To be ¿QDOLVHGDVVRRQDVD representative subset of Phase 2 reviews is completed.

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86 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS Determinations

Factors underlying recommendations

Recommendations

The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5) Phase 1 determination: The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review. Phase 2 rating: To be finalised as soon as a representative subset of Phase 2 reviews is completed.

France rarely advises requesting jurisdictions of the status of their requests when the competent authority is not in a position to respond within 90 days. The competent central authority does not systematically send reminders to the tax units handling an EOI request when they do not submit their responses within 60 days.

France should promptly implement a system for advising requesting jurisdictions of the status of their requests when the competent authority is not in a position to respond within 90 days. France should promptly implement its plan to send automatic reminders to the units responsible for gathering information in order to optimize response times.

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ANNEXES – 87

Annex 1: The Jurisdiction’s Response to the Peer Review*

France would like to thank the assessment team for the tremendous work it has performed, as well as members of the Peer Review Group and other exchange of information partners for their numerous and valuable contributions to the review. France has taken note of the positive findings of the review report. France, which received recommendations to further speed of transmitting information to its partners, has already taken the necessary steps to that effect.

* This Annex presents the Jurisdiction’s response to the review report and shall not be deemed to represent the Global Forum’s views.

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88 – ANNEXES

Annex 2: French Exchange-of-Information Mechanisms

Multilateral agreements France is a party to the: ‡

EU Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation and taxation of insurance premiums. The current EU members, covered by this Council Directive, are: Austria, Belgium, Bulgaria, Cyprus,105 Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. EU Council Directive of 15 February 2011 concerning administrative cooperation in tax matters will strengthen this directive. The deadline for transposition of the directive into the national laws of the member states is 1 January 2013.

‡

EU Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments. This Directive aims to ensure that savings income in the form of interest payments generated in an EU member state in favour of individuals or residual entities

105. Footnote by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognizes the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of United Nations, Turkey shall preserve its position concerning the “Cyprus issue”. Footnote by all the European Union member states of the OECD and the European Commission: The Republic of Cyprus is recognized by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

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ANNEXES – 89

being resident of another EU member state are effectively taxed in accordance with the fiscal laws of their state of residence. It also aims to ensure exchange of information between member states. ‡

Council of Europe and OECD Convention on Mutual Administrative Assistance in Tax Matters, which is currently in force with respect to 14 jurisdictions: Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, the Kingdom of the Netherlands, Norway, Poland, Sweden, the Ukraine, the United Kingdom and the United States.106 France signed its protocol, which is not yet in force.

Bilateral agreements List of information exchange agreements (TIEA) and tax treaties (DTC) signed by France as of 28 February 2011. For jurisdictions with which France has several agreements, a reference to the multilateral agreement is placed in parentheses (Directive 77/799 or OECD/COE treaty). When the date of signature is followed by a date in parentheses, the latter refers to signature of the agreement, while the former refers to signature of the protocol. Jurisdiction

Type of EOI arrangement

Date of signature

Date of entry into force

1.

Andorra

TIEA

22/09/2009

22/12/2010

2.

Anguilla

TIEA

30/12/2010

Not ratified

3.

Antigua and Barbuda

TIEA

26/03/2010

28/12/2010

4.

Bahamas

TIEA

07/12/2009

13/09/2010

5.

Belize

TIEA

22/11/2010

Not ratified

6.

Bermuda

TIEA

12/10/2009

28/10/2010

7.

British Virgin Islands

TIEA

17/06/2009

18/11/2010

8.

Brunei

TIEA

30/12/2010

Not ratified

9.

Cayman Islands

TIEA

05/10/2009

13/10/2010

10.

Cook Islands

TIEA

15/09/2010

Not ratified

11.

Costa Rica

TIEA

16/12/2010

Not ratified

12.

Curacao

TIEA

10/09/2010

Not ratified

13.

Dominica

TIEA

24/12/2010

Not ratified

14.

Gibraltar

TIEA

24/09/2009

9/12/2010

106. Canada, Germany and Spain have signed the Convention and are awaiting UDWL¿FDWLRQ

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90 – ANNEXES Jurisdiction 15.

Grenada

Type of EOI arrangement

Date of signature

Date of entry into force

TIEA

31/03/2010

Not ratified by the partner

16.

Guernsey

TIEA

24/03/2009

4/10/2010

17.

Isle of Man

TIEA

26/03/2009

4/10/2010

18.

Jersey

TIEA

23/03/2009

11/10/2010

19.

Liberia

TIEA

06/01/2011

Not ratified

20.

Liechtenstein

TIEA

22/09/2009

19/08/2010

21.

Saint Lucia

TIEA

01/04/2010

20/01/2011

22.

Saint Maarten

TIEA

10/09/2010

Not ratified

23.

Saint Vincent and the Grenadines

TIEA

13/04/2010

Not ratified by the partner

24.

San Marino

TIEA

22/09/2009

2/09/2010

25.

St Kitts and Nevis

TIEA

01/04/2010

16/12/2010

26.

Turks and Caicos

TIEA

12/10/2009

Not ratified by the partner

27.

Uruguay

TIEA

28/01/2010

31/12/2010

28.

Vanuatu

TIEA

31/12/2009

07/01/2011

29.

Albania

DTC

24/12/2002

01/10/2005

30.

Algeria

DTC

17/10/1999

20/12/2002

31.

Argentina

DTC

15/08/2001 (1979)

01/10/2007

32.

Armenia

DTC

03/02/2004 (1997)

07/12/2006

33.

Australia

DTC

20/06/2006

01/06/2009

34.

Austria

35.

Azerbaijan

DTC (77/799)

26/03/1993

06/12/1994

DTC (COE/OECD)

20/12/2001

01/10/2005

36.

Bahrain

DTC

07/05/2009

1/02/2011

37.

Bangladesh

DTC

09/03/1987

01/09/1988

38.

Belgium

DTC (77/799)

08/02/1999 (1964)

27/04/2000

DTC (77/799)

07/07/2009

Not ratified by the partner

39.

Benin

DTC

27/02/1975

08/11/1977

40.

Bolivia

DTC

15/12/1994

01/11/1996

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ANNEXES – 91

Jurisdiction

Type of EOI arrangement

Date of signature

Date of entry into force

Bosnia Herzegovina

DTC

28/03/1974 (ex-Yugoslavia)

01/08/1975

42.

Botswana

DTC

15/04/1999

14/06/2003

43.

Brazil

DTC

10/09/1971

10/05/1972

41.

44.

Bulgaria

DTC (77/799)

14/03/1987

01/05/1988

45.

Burkina Faso

DTC

03/06/1971 (1965)

01/10/1974

46.

Cameroon

DTC

28/10/1999 (1976)

01/01/2003

47.

Canada

DTC

30/11/1995 (1975)

01/09/1998

48.

Chile

DTC

07/06/2004

10/07/2006

49.

China

DTC

30/05/1984

21/02/1985

50.

Cyprus

DTC

18/12/1981

01/04/1983

51.

Congo

DTC

27/11/1987

01/09/1989

52.

Côte d’Ivoire

DTC

19/10/1993 (1966)

01/05/1995

53.

Croatia

DTC

19/06/2003

01/09/2005

DTC

28/04/2003

01/07/2005

107

54.

Czech Republic

55.

Denmark

Directive 77/799

56.

Ecuador

DTC

16/03/1989

25/03/1992

57.

Egypt

DTC

01/05/1999 (1980)

01/06/2004

58.

Estonia

DTC (77/799)

28/10/1997

01/05/2001

59.

Ethiopia

DTC

15/06/2006

17/07/2008

60.

Finland

DTC (77/799)

11/09/1970

01/03/1972

61.

FYROM

DTC

10/02/1999

01/05/2004

62.

Gabon

DTC

20/09/1995

01/03/2008

63.

Germany

DTC (77/799)

20/12/2001 (1959)

01/06/2003

64.

Georgia

DTC

07/03/2007 (1985)

01/06/2010

65.

Ghana

DTC

05/04/1993

01/04/1997

107. See footnote 105.

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92 – ANNEXES Jurisdiction

Type of EOI arrangement

Date of signature

Date of entry into force

DTC (77/799)

21/08/1963

31/12/1964

66.

Greece

67.

Guinea

DTC

15/02/1999

01/10/2004

68.

Hungary

DTC (77/799)

28/04/1980

01/12/1981

69.

Hong Kong, China

DTC

21/10/2010

Not ratified

70.

Iceland

DTC

29/08/1990

01/06/1992

71.

India

DTC

29/09/1992

01/08/1994

72.

Indonesia

DTC

14/09/1979

13/03/1981

73.

Iran

DTC

07/11/1973

10/04/1975

74.

Ireland

DTC (77/799)

21/03/1968

15/06/1971

75.

Israel

DTC

31/07/1995

18/07/1996

76.

Italia

DTC (77/799, OECD-COE)

05/10/1989

01/05/1992

77.

Jamaica

DTC

09/08/1995

21/05/1998

78.

Japan

DTC

11/01/2007 (1995)

01/12/2007

79.

Jordan

DTC

28/05/1984

01/04/1985

80.

Kazakhstan

DTC

03/02/1998

01/07/2000

81.

Kenya

DTC

04/12/2007

01/11/2010

82.

Kosovo

DTC

28/03/1974 (ex-Yugoslavia)

01/08/1975

83.

Kuwait

DTC

27/01/1994 (1982)

01/03/1995

84.

Latvia

DTC (77/799)

14/04/1997

01/05/2001

85.

Lebanon

DTC

24/07/1962

02/01/1964

86.

Libyan Arab Jamahiriya

DTC

22/12/2005

01/07/2008

87.

Lithuania

DTC (77/799)

07/07/1997

01/05/2001

88.

Luxembourg

DTC (77/799)

24/11/2006 (1958)

27/12/2007

Protocol (77/799)

03/06/2009

29/10/2010

89.

Madagascar

DTC

22/07/1983

01/10/1984

90.

Malawi

DTC

14/12/1950 (ex Franco-British convention)

31/07/1951

91.

Malaysia

DTC

12/11/2009 (1975)

1/12/2010

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ANNEXES – 93

Jurisdiction 92.

Mali

93.

Malta

94.

Mauritania

Type of EOI arrangement

Date of signature

Date of entry into force

DTC

22/09/1972

01/01/1975

DTC (77/799)

28/08/2008 (1977)

01/06/2010

DTC

15/11/1967

01/03/1969

95.

Mauritius

DTC

11/12/1980

17/09/1982

96.

Mexico

DTC

07/11/1991

31/12/1992

97.

Monaco

DTC

26/05/2003 (1969)

01/08/2005

98.

Mongolia

DTC

18/04/1996

01/12/1998

99.

Montenegro

DTC

28/03/1974 (ex-Yugoslavia)

01/08/1975

DTC

18/08/1989 (1970)

01/12/1990

100. Morocco

DTC

29/05/1996

01/05/1999

102. Netherlands

101. Namibia

DTC (77/799, OECD-COE)

16/03/1973

27/02/1974

103. New Zealand

DTC

30/11/1979

19/03/1981

104. Niger

DTC

01/06/1965

01/07/1966

105. Nigeria

DTC

27/02/1990

02/05/1991

106. Norway

DTC

16/09/1999 (1980)

01/12/2002

107. Pakistan

DTC

15/06/1994

01/09/1996

108. Philippines

DTC

09/01/1976

24/08/1978

109. Poland

DTC (77/799, OECD-COE)

20/06/1975

12/09/1976

110. Portugal

DTC (77/799)

14/01/1971

18/11/1972

111. Qatar

DTC

14/01/2008

23/04/2009

112. Central African Republic

DTC

13/12/1969

01/03/1971

113. Republic of Korea

DTC

19/06/1979

01/02/1981

114. Romania

DTC

27/09/1974

27/09/1975

115. Russia

DTC

26/11/1996

06/02/1999

116. Saudi Arabia

DTC

18/02/2011

Not ratified

117. Senegal

DTC

10/01/1991 (29/03/1974, 16/07/1984)

01/02/1993

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94 – ANNEXES Jurisdiction

Type of EOI arrangement

Date of signature

Date of entry into force

118. Serbia

DTC

28/03/1974 (ex-Yugoslavia)

01/08/1975

119. Singapore

DTC

13/11/2009 (1974)

1/01/2011

120. Slovakia

DTC (77/799)

01/06/1973 (ex-Yugoslavia)

25/01/1975

121. Slovenia

DTC (77/799)

07/04/2004

30/03/2007

122. South Africa

DTC

08/11/1993

01/11/1995

DTC (77/799)

10/10/1995

01/07/1997

DTC

17/09/1981

18/11/1982

DTC (77/799, CE/ OCDE)

27/11/1990

01/04/1992

DTC

22/07/1997 (1969)

01/08/1998

Protocol

27/08/2009

4/11/2010

127. Syria

DTC

17/07/1998

01/05/2009

128. Thailand

DTC

27/12/1974

29/08/1975

129. Togo

DTC

24/11/1971

01/04/1975

123. Spain 124. Sri Lanka 125. Sweden 126. Switzerland

130. Trinidad and Tobago

DTC

05/08/1987

01/04/1989

131. Tunisia

DTC

28/05/1973

01/04/1975

132. Turkey

DTC

18/02/1987

01/07/1989

133. Ukraine

DTC

31/01/1997

01/11/1999

134. United Arab Emirates

DTC

06/12/1993 (1989)

01/06/1995

DTC (77/799, OECD-COE)

19/06/2008

18/12/2009

136. United States of America

DTC

13/01/2009 (1994)

23/12/2009

137. Uzbekistan

DTC

22/04/1996

01/10/2003

138. Venezuela

DTC

07/05/1992

15/10/1993

135. United Kingdom

139. Vietnam

DTC

10/02/1993

01/07/1994

140. Zambia

DTC

14/12/1950 (ex Franco-British convention)

31/07/1951

141. Zimbabwe

DTC

15/12/1993

05/12/1996

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ANNEXES – 95

Annex 3: List of Laws, Regulations and Other Relevant Material

‡

Code général des impôts (CGI) [Tax Code]

‡

Livre des procédures fiscales (LPF) [Tax Procedures Code]

‡

Code civil [Civil code]

‡

Code de commerce [Commercial code]

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Code monétaire et financier (CMF) [Monetary and Financial Code]

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Loi du 19 février 2007 instituant la fiducie [Law of 19 February 2007 establishing fiducies]

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Code pénale et Code de procédure pénale [Penal code and Code of criminal procedure]

All French laws are publicly available at the Legifrance web site: www. legifrance.gouv.fr. Some codes are also available in English, although the translation may not be up to date with recent amendments (http://195.83.177.9/ code/index.phtml?lang=uk).

PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – FRANCE © OECD 2011

96 – ANNEXES

Annex 4: Persons Interviewed during the On-Site Visit

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Ministère de l’économie, des finances et de l’industrie ; Direction de la législation fiscale [Ministry of Economy, Finances and Industry; Tax Policy Directorate]: Sous-direction des affaires internationales et européennes (E): responsible for the negotiation of tax treaties and of protocols to those treaties; Bureau en charges des affaires multilatérales et européennes et des comparaisons internationales (E2) : office responsible for relations with the Global Forum and for negotiating information exchange agreements

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Ministère du Budget, des Comptes publics, de la Fonction publique et de la Réforme de l’État; Direction Générale des Finances Publiques (DGFIP) [Ministry of Budget, Public Accounts, Civil Service and Reform of the State, General Directorate of Public Finances]:

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Bureau des Affaires internationales de la sous-direction du contrôle fiscal (CF3) [international affairs office of the fiscal control division]: competent central authority for EOI

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Brigade de contrôle et de recherche (BCR): its task is to seek information and indicators for strengthening the tax base and improving tax control. It also programmes and performs crosschecking operations, nationally or locally.

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Direction nationale des Grandes Entreprises (DGE) – this is the centre responsible for handling tax declarations and tax payments by corporations with annual turnover of EUR 400 million or more, as well as subsidiaries or parent corporations where the controlling interest exceeds 50%.

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Direction des Vérifications Nationales et Internationales (DVNI): responsible for supervising 1300 large corporations and 1000 national and international business groups.

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Attaché fiscal [tax attaché] in London (responsible for the United Kingdom and Ireland).

PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – FRANCE © OECD 2011

ANNEXES – 97

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Ministère de l’Économie, des Finances et de l’Industrie [Ministry of Economy, Finance and Industry]; Direction Générale du Trésor [General Directorate of the Treasury]: responsible for developing and monitoring the fight against money laundering, and for relations with FATF.

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Cellule de renseignement financier [Financial Intelligence Unit], “Tracfin” [acronym for «Processing of information and action against clandestine financial circuits»].

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Centre de formalités des entreprises [Business procedures centre] of the département of Hauts de Seine (92) – Département des Finances publiques.

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Conservation des hypothèques de Paris [Mortgage registry office of Paris]: taxpayers are required to register all official deeds that are subject to publication (dealing with sales of real estate and any movable property) and to pay the corresponding duties and fees at this office. This office also has complete information on the legal status of properties, including the identity of their owners.

PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – FRANCE © OECD 2011

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Global Forum on Transparency and Exchange of Information for Tax Purposes

PEER REVIEWS, COMBINED: PHASE 1 + PHASE 2

FRANCE The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. “Fishing expeditions” are not authorised, but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please visit www.oecd.org/tax/transparency. Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: France 2011: Combined: Phase 1 + Phase 2, Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing. http://dx.doi.org/10.1787/9789264114708-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.

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