A Review of France’s Draft Pillar Two Law

Overview

Article 4 of the French  2024 Finance Bill (published on September 27, 2023) includes provisions to implement the  EU Global Minimum Tax Directive (the ‘EU Directive’).

As provided in the EU Directive, the draft law includes an income inclusion rule (IIR) and an under-taxed profits rule (UTPR). 

The IIR is effective from January 1, 2024, whilst the UTPR will generally apply from January 1, 2025.

A domestic minimum tax (intended to be a Qualified Domestic Minimum Top-Up Tax (‘QDMTT’)) is also proposed to apply from January 1, 2024.

Whilst the draft law applies the provisions of the EU Global Minimum Tax Directive, it does not implement many of the provisions of the OECD Administrative Guidance (either the first or second set). The main exception is the inclusion of the QDMTT Safe Harbour and the Transitional UTPR Safe Harbour. 

The Transitional CbCR Safe Harbour was included from the OECD Safe Harbours and Penalty Relief Rules. The Simplified Calculation Safe Harbour for Non-Material Constituent Entities was not included. 

General