Ord. 2019-1068 of 21/10/2019
The order transposing into French law the Directive imposing the reporting of certain cross-border arrangements has been published. A few precisions were made at this time, and penalties in case of failure to report have been fixed.
1. Applicable as regards direct taxes, the Directive transposed, no. 2018/822 of 25 May 2018, known as “DAC6”, aims to reinforce transparency and clamp down on fraud and tax evasion, by providing an obligation, for intermediaries (lawyers, accountants, credit institutions, etc.) or, where applicable, taxpayers, to report to the tax authorities cross-border arrangements of a potentially aggressive nature. The reports thus submitted are then the subject of an automatic exchange of information between Member States of the European Union.
The obligation only concerns arrangements involving two Member States or one Member State and a third state. Furthermore, these arrangements need only be reported if they present at least one feature or specificity, called “hallmark”, indicating a potential risk of tax evasion. These hallmarks, set out in Annex IV of the Directive, may be of a generic or specific nature (e.g. reduction in the tax base, transfer of profits, or bypassing of exchanges of information).
Under the terms of the Directive, these provisions shall take effect in accordance with the following terms:
- cross-border arrangements whereby the first step is implemented between 25 June 2018 and 1st July 2020 must be reported no later than 31 August 2020;
- from 1st July 2020, and save in the case of exceptions, the report must be filed within a period of 30 days from the first of the following dates: the day after the reportable cross-border arrangement is made available for implementation, the day after the reportable cross-border arrangement is ready for implementation, or when the first step in the implementation of the reportable cross-border arrangement has been made.
2. Article 1 of Order no. 2019-1068 of 21 October 2019 (JO 22 text no 18) transposes the provisions of the Directive under new Articles 1649 AD to 1649 AH of the French GTC. Article 1649 AD defines the scope of the reporting obligation. Article 1649 AE identifies the persons subject to this obligation, i.e. the intermediaries, or the taxpayer when there is no intermediary or when the intermediary is established outside of the European Union or, under certain conditions, when it is subject to professional secrecy. Article 1649 AF establishes the rule of territorial priority when an intermediary or a taxpayer has a reporting obligation in several Member States of the European Union. Article 1649 AG determines the generating event of the reporting obligation and the timeframe to submit the report. Lastly, Article 1649 AH codifies the hallmarks that characterise the arrangement to be reported. Article 1 of the Order furthermore fixes the applicable penalties in case of failure to respect this obligation, under a new Article 1729 C ter of the GTC.
Article 2 of the Order adopts the terms of effect fixed by the Directive.
3. The transposition is mainly operated under terms similar to those used by the Directive. The list of hallmarks presented in Annex IV of the Directive is adopted identically in Article 1649 AH of the GTC. The definition of these hallmarks, sometimes imprecise, is not explained.
A few precisions, presented hereunder, are however provided on various points.
The concept of cross-border arrangement
4. Adopting in substance the provisions of the Directive, Article 1649 AD, II of the GTC defines as cross-border any arrangement concerning France and another Member State of the European Union or third country, when at least one of the following conditions is met:
- at least one of the participants in the arrangement is not resident for tax purposes or resident in France or does not have its registered office there;
- at least one of the participants in the arrangement is resident for tax purposes, resident, or has its registered office simultaneously in several States or territories;
- at least one of the participants in the arrangement carries on a business in another State or territory through a permanent establishment situated in that State or territory and the arrangement forms part or the whole of the business of that permanent establishment;
- at least one of the participants in the arrangement carries on a business in another State or territory without being resident there for tax purposes or creating a permanent establishment situated in that State or territory;
- such arrangement has a possible impact on the automatic exchange of information between States or territories or the identification of beneficial ownership.
- article 1649 AD, II specifies that the cross-border arrangements may take the form of an agreement, an arrangement or a plan, which may or may not be enforceable.
The intermediaries concerned and their obligations
5. In terms similar to those used by the Directive, Article 1649 AE, I-2o of the GTC provides that the intermediary having participated in the implementation of a cross-border system in question is bound to submit a report if it meets at least one of the following conditions:
- be resident for tax purposes, resident, or have its registered office in France;
- have a permanent establishment in France through which the services with respect to the arrangement are provided;
- be incorporated in or governed by the laws of France;
- be registered with a professional association related to legal, taxation or consultancy services, or benefit from a licence to practise in France issued by such professional association.
It is specified that the permanent establishments situated outside of France of an intermediary resident for tax purposes or resident in France, for the arrangements relating to their activity, are not affected by the reporting obligation.
6. In compliance with the Directive, Article 1649 AE, I-3o of the GTC provides that in the event where several intermediaries participate in the implementation of the same arrangement, the reporting obligation is incumbent upon each of them, and fixes the conditions under which an intermediary, as an exception to this rule, may be exempt from the reporting obligation.
The exemption shall apply if this intermediary has proof, by any means:
- that a report containing all information required has already been submitted by another intermediary in France or in another Member State of the European Union,
- or that a report has already been submitted by another intermediary in France or in another Member State of the European Union, that the other intermediaries, or otherwise the taxpayers concerned by the cross-border arrangement have received a notification of the reporting obligation, and that it has not received such notification itself.
7. Article 1649 AE, I-4o of the GTC fixes the conditions under which intermediaries subject to professional secrecy (lawyers, for example) may be exempted from the obligation to provide the tax administration with information about a cross-border arrangement.
This text thus provides that the intermediary subject to the professional secrecy obligation set out in and sanctioned by Article 226¬13 of the French Criminal Code may only submit the report with the agreement of the taxpayer(s) concerned by the cross-border arrangement. In the absence of such agreement, the intermediary must notify any other intermediary about the reporting obligation incumbent upon it. In the absence of other intermediary, the intermediary must notify the reporting obligation to the taxpayer concerned by the arrangement. It must also send it, where applicable, the information necessary to respect its reporting obligation. These notifications shall be made by any means conferring on them a certain date.
8. Article 1649 AG, I-4o of the GTC adopts the provisions of the Directive providing that a periodic report be made by the intermediary every 3 months providing an update which contains new reportable information relative to arrangements designed, marketed, ready for implementation or made available for implementation without a need to be substantially customised (“marketable arrangements”). It specifies that the terms of this update shall be fixed by decree.
Form and content of the report
9. Article 1649 AD, I of the GTC specifies that the report must be submitted in electronic form.
10. This list of information having to be provided in the reports, fixed by the Directive, is not adopted in the transposition order. Article 1649 AD, IV of the GTC provides only that the information contained in the reports will be specified by decree.
Additional report on the use of the arrangements
11. In compliance with the Directive, Article 1649 AG, II-2o of the GTC provides that each taxpayer must report to the administration each year its use in the previous year of the cross-border arrangements concerning it. The terms of this report will be fixed by a decree of the Minister responsible for the budget.
Penalties
12. The Directive leaves Member States to lay down penalties against the violation of national rules resulting from the transposition. It is specified that these penalties must be “effective, proportionate and dissuasive”.
Pursuant to these provisions, Article 1, II of the Order, codified in Article 1729 C ter of the GTC, provides that violations of the reporting obligation or notification of this obligation shall be sanctioned by the application of a fine not exceeding €10,000. When it is the first offence of the current calendar year and the three preceding years, the amount of the fine may not exceed €5,000.
The fine shall not apply to breaches of the obligation incumbent upon the taxpayer to annually report its use of an arrangement for the previous year. Lastly, the amount of the fine applied to a same intermediary or to a same taxpayer concerned may not exceed €100,000 per calendar year.
