Article 33 of the French 2024 Finance Act (published in the Official Gazette on December 30, 2023) includes provisions to implement the EU Minimum Tax Directive (the ‘EU Directive’).
As provided in the EU Directive, the law includes an income inclusion rule (IIR) and an under-taxed profits rule (UTPR).
The IIR is effective for financial years beginning on or after December 31, 2023, whilst the UTPR will generally apply for financial years beginning on or after December 31, 2024.
A domestic minimum tax (intended to be a Qualified Domestic Minimum Top-Up Tax (‘QDMTT’)) is also proposed to apply for financial years beginning on or after December 31, 2023.
Whilst the law applies the provisions of the EU Minimum Tax Directive, it does not implement many of the provisions of the Second or Third Set of OECD Administrative Guidance The main exception is the inclusion of 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.
On 10 October 2024, the French Government presented the draft Finance Bill for 2025 to Parliament. This includes amendments to its General Tax Code to reflect the OECD Administrative Guidance, including the December 2023 OECD amendments to the Safe Harbours. This will apply to financial years ending on or after December 31, 2024.
On December 5, 2024, Decree No. 2024-1126 was published in the French Official Gazette. This provides additional details on the reporting requirements for Pillar 2 purposes. The Pillar 2 Notification Form (N° 2065-INT-SD 2025) was subsequently issued.
In the January 2025 Central Record of Legislation with Transitional Qualified Status issued by the OECD, the French IIR and DMTT are both treated as qualified for GloBE purposes.
As expected, the law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation.
As noted below, there are significant aspects of both sets of OECD Administrative Guidance that are not included in the law. Further decrees may therefore be expected to implement these provisions.
The only aspects of the First Set of OECD Administrative Guidance included in the law are:
– Forex hedge election (Article 2.2)
– Excluded Dividends – Asymmetric treatment of dividends and distributions (Article 2.3)
– Debt release election (Article 2.4)
– Accrued Pension Expenses (Article 2.5)
– Excess negative tax carry-forward guidance (Article 2.7)
– Substitute Loss carry forwards (Article 2.8)
– The extension of the taxable distribution method election to insurance investment entities (Article 3.1)
– Exclusion of Insurance Investment Entities from the definition of Intermediate Parent Entity and Partially-Owned Parent Entity (Article 3.2)
– Extension of definition of restricted tier 1 capital (Article 3.3)
– Liabilities related to Excluded Dividends and Excluded Equity Gain or Loss from securities held on behalf of policyholders (Article 3.4)
– Portfolio shareholding election (Article 3.5)
– Transitional Rules (Article 4)
The Transitional CbCR Safe Harbour from the Second Set of OECD Administrative Guidance is included in the law.
As such, the following are not included in the law:
– Blended controlled foreign company regimes;
– Transferable tax credits;
– Meaning of “ancillary” for Non-Profit Organisations;
– Excluding sovereign wealth funds from the definition of Ultimate Parent Entity;
– The extension of the tax transparency election to mutual insurance companies; and
– Additional rules (such as the deemed 50% requirement where employees perform work outside the employer’s jurisdiction for the SBIE).
The December 2023 OECD Administrative Guidance provides that groups can still qualify for the Transitional CbCR Safe Harbour if they complete Article 2.2.1.3(a) of the GloBE Information Return using the data from Qualified Financial Statements that would have been reported as Total Revenue and PBT in a Qualified CbC Report if the MNE Group were required to file a CbC Report. This is designed to ensure that domestic groups for instance can still qualify for the safe harbour (as they would not otherwise prepare CbC reports.
Article 223 VZ of the French Finance Act provides for this and states that the amounts that the CbCR Safe Harbour are tested against are the amounts derived from the French statutory accounts (eg the PBT and turnover). This is further clarified in the 2025 Finance Bill.
The 2025 Finance Bill includes a number of aspects from the First, Second and Third Set of OECD Administrative Guidance. The Fourth Set of OECD Administrative Guidance (issued on June 17, 2024) and January 2025 OECD guidance is not included and the Explanatory Notes to the Bill note that they will be included in a future draft finance bill or, in Regulations. The 2025 Finance Bill includes:
-Rebasing monetary thresholds in the GloBE Rules (Article 1.1 – First Set of OECD Administrative Guidance)
-Equity Gain or loss inclusion election (Article 2.9 – First Set of OECD Administrative Guidance)
-MTTCs (Article 2 – Second Set of OECD Administrative Guidance)
-SBIE Rules (Article 3 – Second Set of OECD Administrative Guidance):
-Foreign rules
-Leases
–QDMTT Safe Harbour (Article 4.1 – Second Set of OECD Administrative Guidance)
-Transitional CbCR – Purchase Accounting Adjustments (consistent reporting condition, goodwill impairment adjustment) (Article 1 – Third Set of OECD Administrative Guidance)
-Transitional CbCR – Same Financial Statements/Local Financial Statements for Statutory Reporting (Article 2.3.1 – Third Set of OECD Administrative Guidance)
-Transitional CbCR – Adjustments to Qualified Financial Statements/Dividend Mismatches (Article 2.3.3 – Third Set of OECD Administrative Guidance)
-Transitional CbCR – MNEs not required to file CbC Reports (Article 2.3.4 – Third Set of OECD Administrative Guidance)
-Transitional CbCR – Treatment of hybrid arbitrage arrangements (Article 2.6 – Third Set of OECD Administrative Guidance)
The law provides for the application of the Transitional CbCR Safe Harbour, and the Transitional UTPR Safe Harbours.
Articles 13(129)-(135) of the 2025 Finance Bill includes the QDMTT Safe Harbour and Article 13(60) provides for simplified calculations for NMCEs.
As noted above, the 2025 Finance Bill also includes aspects of the December 2023 Administrative Guidance that amend the Transitional CbCR Safe Harbour rules.
All of the elections included in the OECD Model Rules and the EU Minimum Tax Directive are provided in the law, including:
– Excluded Entity Election (Article 223VL ter of the law – applies only to excluded entities that are 95% or 85% subsidiaries)
– Stock-Based Compensation Election (Article 223 VO octies of the law)
– Election to use the Realization Method (Article 223 VO nonies of the law)
– Election to Spread Capital Gains (Article 223 VO decis of the law)
– Consolidation Election (Article 223 VO undecies of the law)
– Unclaimed Accrual Election (Article 223 VU SEEN of the law)
– GloBE Loss Election (Article 223 VV of the law)
– Prior Year Adjustment Election (Article 223 VX of the law)
– De minimis Election (Article 223 WD of the law)
– Substance-Based Income Exclusion Election (Article 223 WA of the law)
– Taxable distribution Election (Article 223 WV of the law)
– Tax transparency Election (Article 223 WU of the law)
– Distribution Tax Regime Election(Article 223 WS of the law)
– Safe Harbour Elections (Transitional CbCR Safe Harbour plus the Transitional UTPR Safe Harbour).
Elections included in the OECD Administrative Guidance that are included in the law include the:
– Debt Release Election (Article 223 VO duodecies of the law)
– Foreign Exchange Hedge Election (Article 223 VO quaterdecies of the law)
– Portfolio Shareholding Election (Article 223 VO terdecies of the law)
– Excess Negative Tax Carry-Forward Election (Article 223 VT Quater of the law)
Article 13(28) of the 2025 Finance Bill includes the Equity Investment Inclusion Election.
Article 223 WF of the law applies a domestic minimum tax from December 31, 2023.
Article 223 WF(2) provides that the standard GloBE calculation rules are to be used for the QDMTT calculation.
Under Article 223 WF(2) of the law, MNEs can opt not to use the UPEs accounting standard and can instead use IFRS or the French accounting standard.
This means, for instance, that a French-based low-taxed group entity may choose to compute the excess profit for QDMTT purposes based on IFRS whilst its UPE uses GAAP of the USA in the preparation of its consolidated financial statements.
However, this is to be deleted in Article 13(116) of the 2025 Finance Bill, as such the general provisions of the GloBE rules will apply for this purpose.
Therefore, GloBE income for QDMTT purposes is calculated using the financial accounting standard of the ultimate parent entity, and, if that is not practicable, on the basis of an accepted or approved accounting standard, if:
-the constituent entity’s financial statements are prepared in accordance with that standard;
-the information contained in the financial statements is reliable;
-in the case of an Authorised Financial Accounting Standard, the financial accounts have been prepared subject to adjustments to prevent any Material Competitive Distortions;
-permanent differences of more than EUR 1 million are conformed with the UPEs accounting standard.
Other provisions of the OECD Administrative Guidance relating to the design of QDMTTs are not included (eg there is no restriction on the pushdown of hybrid taxes or taxes on distributions). This is included in Article 13(43)-(48) of the 2025 Finance Bill.
Article 13(120)-(123) of the 2025 Finance Bill provides that each constituent entity in France is liable for its QDMTT. The QDMTT allocated to a constituent entity for a financial year is equal to the QDMTT of the group allocated on the ratio between the QDMTT calculated individually by the entity and the total QDMTT for all group entities in France.
However, the MNE/Domestic group can designate a group entity in France to account for the QDMTT for investment entities and insurance investment entities.
In the January 2025 Central Record of Legislation with Transitional Qualified Status issued by the OECD, the French QDMTT qualifies for the QDMTT Safe Harbour.
For detailed information on the application of the GloBE Rules in France based on the latest Law, see our:
OECD Administrative Guidance: Domestic Implementation Matrix
Transitional CbCR Safe Harbour: Domestic Implementation Matrix
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