Intragroup financing remains one of the main sources of controversy with French tax authorities. These tax reassessments, which can destroy value, may also be accompanied by penalties.
Since 2019, the French tax authorities has offered intermediate-sized enterprise (ETI) and large enterprises, through a partenariat fiscal program, support on their strategic tax issues. This program, which fosters essential dialogue between the French tax authorities and businesses on the tax implications of their activities, has already been utilized by some 116 corporate groups.
This partenariat fiscal, a welcome solution for enhancing tax certainty, represents an opportunity to address certain tax challenges arising from intragroup financial transactions.
Should You Use the Partenariat fiscal for Your Intragroup Financing?
The partenariat fiscal enables companies to obtain a binding position from a dedicated service—the Service Partenaire des Entreprises (SPE)—on questions submitted by the company. These questions may concern all taxes and current-year tax issues.
Furthermore, this support also covers transfer pricing policies, including the assessment of the arm’s length nature of remuneration for loans, financial guarantees, and cash pooling. By presenting all or part of their analyses, companies can, for example, avoid subsequent challenges to interest deductions, secure the validity of remuneration methods for cash pooling entities, or confirm the payment of a guarantee fee in return for a financial guarantee.
While the position taken by the SPE does not constitute an advance pricing agreement, it does ensure much smoother and faster handling of high-stakes French tax issues.
Which Companies Are Eligible for the Partenariat fiscal?
French tax authorities are committed to ensuring that this support is available only to companies acting in good faith. Thus, only companies that:● Are up to date with their tax filing and payment obligations; and● Have not been subject to penalties for intentional non-compliance in the past three years (unless there has been voluntary disclosure or a tax relief), are eligible for the Partenariat fiscal.
While these conditions are generally assessed at the level of the company signing the agreement, penalties incurred by a member of a tax consolidation group may unfortunately be taken into account in certain situations.
How Does the Partenariat fiscal Work?
The partenariat fiscal is formalized through a non-binding protocol with the SPE, which is separate from the teams responsible for tax audits. The company is then assigned a dedicated contact to assist with technical issues raised by the company for the current year.
These exchanges result in a formal position from the French tax authorities, in the form of a tax ruling, typically issued within three months. The company remains free to choose whether or not to follow the advice provided by the SPE.
Both the company and the SPE may decide to terminate their participation in the partenariat fiscal at any time.