2020 French budget introduces ATAD II and corporate tax rate provisions

Overview

The French Parliament on December 19, 2019 approved the Finance Act for 2020 (the Finance Act). The Finance Act was subject to constitutional review before publication in the French legal gazette on December 29.

The Finance Act includes corporate tax measures designed to transpose into French law Articles 9, 9 bis, and 9 ter of EU anti-tax-avoidance directive 2016/1164 dated July 12, 2016 (ATAD I) as modified by EU directive 2017/952 dated May 29, 2017 (ATAD II).  The Finance Act also includes other EU-compliant measures and postpones, for large companies, the scheduled reduction of the corporate income tax rate.  

Most of the measures apply for tax years beginning on or after January 1, 2020, and impact multinational enterprises (MNEs) with French operations or subsidiaries. The Finance Act contains other tax provisions that are not covered in this Insight.

The takeaway

Multinational companies operating in France should consider the impact of the Finance Act with respect to their international flows, structure, and tax obligations.  ATAD II provisions require a thorough understanding of the interactions and conflicts between foreign tax regimes with respect to the same structures or flows.