Repeated pressure has not been enough to sway the French government over its patent boxes. In mid-July, the services of the European Commission updated the list of countries that have modified their intellectual property-friendly tax regimes (patent boxes).
In a document to the 'corporate taxation code of conduct' group at the Council, the Commission assesses each member state's such regimes in light of four criteria: a cut-off date for new entrants, one for existing beneficiaries, enhanced transparency on these beneficiaries and 'grandfathering' provisions for certain assets.
France is the only member state to have tripped up over all four criteria; yet it has been nearly three years since the code of conduct group agreed that each state would review its regime and bring it into line with international standards and one year since the same group, and then the OECD, stepped up the pressure on France. The infamous 'modified nexus approach', which is the subject of international consensus, aims to link the actual economic activity to the tax advantage.
France considers that with a tax rate of 15%, its tax regime is frankly unattractive to anybody wishing to practise aggressive tax optimisation. In November of last year, the code of conduct group informed the finance ministers of the situation, stating that “tax measures which provide for a significantly lower effective level of taxation (…) than those levels which generally apply in the member state are to be regarded as potentially harmful (…). The French IP regime tax rate is significantly lower than the general tax rate in France (33.3%)”, (see EUROPE 11664).
In its July report, the Commission stresses that certain provisions are also taking a long time to be adopted in Italy and various provinces of the Basque country. By way of information, it clarifies that in the second half of 2016, 961 taxpayers benefited from the Italian regime, representing a tax advantage in the region of €1.76 million. 85% of beneficiaries were SMEs.
In any event, no change of tack is currently being considered to convince France to amend its regime. The code of conduct group will continue to assess the situation in 2017, giving priority to dialogue. (Original version in French by Élodie Lamer)