1. Countries included on the French “blacklist” of uncooperative territories published on 2 March 2022:
- American Samoa
- British Virgin Islands
- Trinidad & Tobago
- US Virgin Islands
2. French Tax effects for blacklisted territories
Below is a non-exhaustive summary of the French tax implications for individuals, companies and other entities resident in the blacklisted territories or French resident individuals, companies and entities who have any dealings with them.
2.1 Article 123 bis provides that French residents who own 10% or more in a financial investment holding entity situated in a low tax jurisdiction are taxed on a look-through basis on their share of the income arising within the entity. If such entity is registered in a blacklisted territory or a territory with no agreement with France to fight fraud and tax evasion, there is a presumption that the 10% holding limit is reached. In these cases the taxpayer is assessed on a minimum taxable income basis if this is higher than the effective income produced. The minimum income rates are as follows:
- 2012: 3.39%
- 2013: 2.79%
- 2014: 2.79%
- 2015: 2.15%
- 2016: 2.03%
- 2017: 1.67%
- 2018: 1.47%
- 2019: 1.32%
- 2020: 1.18%
- 2021: 1.17%
- 2022: 2.25%
2.2 Article 244 bis which deals with the taxation of French property traders stipulates that their profits are taxed at 33.3%, but this rate is increased to 75% for traders resident in blacklisted territories.
2.3 Article 244 bis A relates to French capital gains tax on the disposal of French real estate. The rate of 75% applies to gains realised by residents (individuals and entities) of blacklisted territories instead of 19%. French social surcharges totalling 17.2% are also payable by individuals (not entities) leading to a total rate of 92.2% on the gain where the taxpayer is a resident of a blacklisted territory.
2.4 Article 244 bis B: The sale of French stocks and shares may be subject to the 75% levy regardless of the level of shareholding.
2.5 Under Article 125-0-A the taxable proceeds from an “assurance vie” paid to a resident of a blacklisted territory are subject to a mandatory withholding tax rate of 75%.
2.6 Articles 119 bis and Article 182 B – Under these articles, the 75% rate applies to dividends, other income or remuneration paid to residents of such territories. Salaries thankfully are not affected and are subject to rates of 12% and 20% maximum with a tax-free portion. Payments made to artists performing in France are normally taxed at 33.33% or 15% under Article 182 A bis. This increases to 50% if the artist resides in an uncooperative territory.
2.7 French-connected trusts with a trustee established in a blacklisted jurisdiction are subject to the 60% inheritance tax rate.
2.8 Where a French company owns 50% or more in an entity registered in a blacklisted territory, corporation tax is levied in France on that entity’s profits (Article 209B).
2.9 If a French company’s subsidiary is registered in a blacklisted territory the exemption from corporation tax for the French company receiving its dividends is disallowed.
2.10 Article 238 A relates to transfer pricing and the deductibility of certain payments made by individuals or companies in France. If the entity receiving these payments is situated in a low rate territory, the French taxpayer or entity must provide full evidence that pricing is adequate and the payment represents a bona fide transaction.
In most cases, and subject to specific conditions, taxpayers may contest the application of the above transfer rules and rates if they can justify that their ties with the blacklisted jurisdiction is not tax motivated.
There may be other issues resulting from the blacklisting of the above territories. Advice should therefore be sought when dealing with these jurisdictions and ideally before any transaction takes place.
For more information, please contact Virginie Deflassieux or Catherine Le Pelley.
This publication has been carefully prepared, but it has been written in general terms and should be seen as containing broad statements only. It cannot be relied upon to cover specific situations without obtaining professional advice.
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