Global Tax Alert | 10 July 2013

French Tax Authorities issue draft guidelines on migration of corporate headquarters or establishments

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The third French Amended Finance Bill for 2012 introduced a specific tax regime governing the migration of corporate headquarters or of establishments into another EU member State.1

The French tax authorities (FTA) released draft guidelines2 on this regime on 3 July 2013 for public comments (comments may be sent to the FTA by 31 July 2013). The key provisions of the draft guidelines, which are already enforceable against the FTA, are summarized below.

Overview of the statute

Under the previous regime and the practice of the FTA, the migration of a company's head office abroad (including to another EU member State) resulted in the immediate taxation of latent capital gains on the company's assets unless these assets remained allocated to a French permanent establishment (PE).

Under the new regime, codified under Section 221-2 of the French Tax Code (FTC), latent gains on assets transferred upon the migration of a corporate headquarter or an establishment from France to another EU member State or to an eligible member State of the European Economic Area (EEA)3 are still taxed, but the relevant tax may, upon request of the company, be paid in five annual installments.

Outstanding installments become immediately payable if: (i) an installment is not paid when due, (ii) the transferred assets are sold to another party (whether related or not), (iii) the transferred assets are transferred into a non-EU/eligible EEA member State, or if (iv) the company is wound-up.

These new rules apply to migrations implemented on or after 14 November 2012.

Key content of the draft guidelines

Scope of the new rules

The draft guidelines specify that the new rules apply to assets transferred upon the migration of a French: (i) statutory head office, (ii) place of effective management, or (iii) “establishment” or “fixed place of business”4 (including the transfer abroad by a French company of assets amounting to an establishment or fixed place of business). However, a sale of assets to another entity, or a transfer of isolated assets (e.g., assets previously allocated to another line of business than the one transferred) does not benefit from the regime.

The FTA indicate that the transfer is materialized by accounting entries booked in the balance sheet of the French transferor and of the EU or EEA transferee; however, the transfer of tangible movable assets would also be materialized by their physical transfer.

The draft guidelines list the assets which are eligible for the regime by referring to French GAAP, but notably omit shareholdings. While it is clear in the draft guidelines that the FTA refuse to apply the new regime to the 12% taxable portion of capital gains on certain qualifying shareholdings (so-called “long term capital gains” on shares), it is unclear based on this draft whether gains on other shareholdings are to be excluded as well.

Tax filing requirements and payments

If the taxpayer does not elect for the installment regime, the draft guidelines state that the applicable taxes are due within two months following the transfer.

In order to benefit from the taxation over a five-year period, the transferor needs to file, within two months following the transfer, a specific tax form (attached to draft guidelines) detailing the capital gains and related CIT. The first installment has to be paid along with such filing.

An updated form is filed, and annual installments are paid, each of the four following years no later than on the anniversary of the first payment date. Filing errors or omissions trigger a penalty of 5% of the omitted amounts, while a late payment triggers an acceleration of all outstanding installments.

Acceleration of outstanding installments

According to the draft guidelines, the sale of even a single asset that benefited from the regime, or its transfer into a non-EU / eligible EEA member State, would trigger the acceleration of the outstanding installments corresponding to the gains on all assets initially transferred.

Other tax consequences of a migration

In their draft guidelines, the FTA now also indicate that no deemed dividend arises at shareholder level upon the migration of a corporate headquarter or an establishment from France to another EU/eligible EEA member State whether or not the company retains any assets in France.

In the reverse situation of a migration of a corporate headquarter or an establishment from an EU/eligible EEA member State to France, the draft guidelines specify that the assets take a stepped up value (fair market value) for French CIT purposes.


1. See EY Global Tax Desk Alert, France: Parliament approves third amended Finance Bill for 2012, dated 27 December 2012.

2. Reference: BOI-IS-CESS-30-20130703 available on

3. Only those EEA States which have entered into an administrative assistance agreement for the prevention of fiscal evasion and fraud and into a mutual assistance agreement on tax collection meeting the standards of EU directive 2010/24/UE with France are eligible. This is the case for Norway and Iceland but not Liechtenstein.

4. “Establishment” is a domestic law concept defined as a permanent and autonomous place of business. “Fixed place of business” has the meaning ascribed by double tax treaties.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Société d'Avocats, Paris
  • Claire Acard
    +33 1 55 61 10 85
Ernst & Young LLP, French Tax Desk, New York
  • Frédéric Vallat
    +1 212 773 5889
  • Daniel Brandstaetter
    +1 212 773 9164
  • Martin Birée
    +1 212 773 3065
Ernst & Young LLP, Financial Services Desk, New York
  • Sarah Belin-Zerbib
    +1 212 773 9835

EYG no. CM3625