Communications from the firm

A new argument against the withholding tax of article 119 bis of the CGI

In an important case which Frenkel & Associés is about to refer to the Administrative Court of Bordeaux, an alleged liberality granted by a French company, subsidiary of a Chinese group, to a Hong Kong sister company is at stake, which the administration claims to subject to the withholding tax of article 119 bis of the French tax code. Alain Frenkel intends to raise a new question regarding the application of the administrative doctrine. Indeed, the French “BOFiP” has consistently stated since 2012, in its commentary on hidden remuneration and distributions, that the latter “escape any withholding tax” (RPPM-RCM-10-20-20-40, § 30). However, this statement is contradicted by the commentary on withholding tax, which states that “withholding tax may be applied to hidden benefits granted to third parties (…) on the basis of the provisions of c of article 111 of the CGI” (RPPM-RCM-30-30-10-10, § 70).

The Cabinet Frenkel & Associés argues that the taxpayer can rely on the first of these interpretations, which is favorable to him, since it is set out in an autonomous part of the “BOFiP” and is, moreover, sufficient – since it does not, by definition, need to be supplemented by the comments relating to the terms and conditions for applying the withholding tax.