KPMG: Transactions Involving France’s ‘Blacklist’

KPMG has said that transactions involving jurisdictions on France’s “black list” — which now include Bermuda — are subject to additional transfer pricing documentation requirements.

Last month France added Bermuda to its “list of uncooperative tax havens”, with Bermuda joining Botswana, the British Virgin Islands, Brunei, Guatemala, Jersey, the Marshall Islands, Montserrat, Nauru, and Niue on the list.

The Bermuda Government said they were “surprised” as Bermuda has an existing exchange of information agreement [TIEA] with France, one of 39 bilateral transparency agreements Bermuda has, including with 90% of the G20 countries.

“Bermuda’s Ministry of Finance has contacted officials within the French government seeking clarification regarding this action and stating Bermuda’s position as we seek to resolve this issue,” a statement from Government said.

KPMG recently issued a press release about the matter, which follows in full below:

The French government reviewed and updated its “black list” of countries identified as being non-cooperative states and territories—i.e., jurisdictions not satisfying the exchange of tax information standards.

The French Ministry of Finance on 21 August 2013 added Bermuda, Jersey, and the British Virgin Islands (BVIs) to the black list, and removed the Philippines.

These changes are effective retroactively to 1 January 2013. However, they will affect transactions made with entities in these jurisdictions from 1 January 2014.

France’s updated “black list” now contains: Bermuda, Botswana, the British Virgin Islands, Brunei, Guatemala, Jersey, the Marshall Islands, Montserrat, Nauru, and Niue.

Transactions involving these “black list” jurisdictions are subject to additional transfer pricing documentation requirements, and also invoke or involve the CFC rules, French withholding taxes, the French participation exemption regime, capital gains treatment, and the deductibility of expenses.

French entities that enter into transactions with related-party companies located in one of these jurisdictions will need to provide certain information to the French tax administration during a tax audit— e.g., a balance sheet, and profit and loss account prepared in line with the anti-avoidance measures provided by Article 209 B of the French general tax law (provisions that impose French corporate income tax on the profits or positive earnings of a legal entity operating under a “privileged tax regime” when directly or indirectly held (more than 50% of its shares, financial interest or voting rights) by a French taxpayer).

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