ECOVIS Elkadeem & Co.

Country-by-country reporting France: List of countries with agreements updated

29.06.2022

France has updated the list of countries that have concluded an agreement on the exchange of country-by-country reporting (CbCR). Companies that do not submit this declaration must expect a fine of EUR 100,000. However, there are exceptions. The Ecovis experts know the current rules.

Multinational companies with consolidated revenues of EUR 750 million or more are required to file a country-by-country reporting return each year in France within 12 months from the date of closing of their financial year (CGI art. 223 quinquies C of the French tax code). A EUR 100,000 penalty may apply for failing to file the return. However, entities owned or controlled by an entity established in a country that has adopted similar regulations and has entered into an agreement with France allowing for the automatic exchange of reported information are exempt from this obligation.

The initial list of countries concerned was set out in order ECOE1714076A dated 6 July 2017 and has been progressively updated (order ECOE1834376A, 26 December 2018; order ECOE2013143A, 20 July 2020; order ECOE2100179A, 3 February 2021). Order ECOE2201859A dated 14 February 14 2022 updates the list of countries for financial years (FY) beginning on or after 1 January 2020.

List of countries with country-by-country reporting agreements with France

The countries listed now are: the member states of the European Union, Andorra, Anguilla, Argentina, Australia, Azerbaijan, Belize, Bermuda, Brazil, British Virgin Islands, Canada, Cayman Islands, Chile, China, Colombia, Costa Rica, Curaçao, Gibraltar, Guernsey, Hong Kong, Iceland, India, Isle of Man, Indonesia, Japan, Jersey, Kazakhstan, Liechtenstein, Macau, Malaysia, Mauritius, Mexico, Monaco, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Peru, Qatar, Russia, Saudi Arabia, San Marino, Seychelles, Singapore, South Africa, South Korea, Switzerland, Turkey, Turks and Caicos Islands, United Arab Emirates, United Kingdom, Uruguay.

Israel is not on the list because although it was added for FYs beginning on or after 1 January 2017, it has been removed for FYs beginning on or after 1 January 2020.

We can support you in correctly implementing country-by-country reporting for your company.

Vanessa Raindre, Tax partner, MD Legal, Paris, France

Exceptions for non-listed countries

For countries that are not listed (such as, for example, the USA) and based on the “Ultimate Parent Surrogate Filing” derogatory procedure provided by the OECD, the French tax administration has declared that French subsidiaries of a foreign group whose parent company resides in a country that has not signed an automatic CbCR exchange agreement with France will not have to file this return in France if:

• The parent company of the group has filed a CbCR return in its country of residence for the financial year concerned (including voluntary filings)
• The country authorises the voluntary filing of CbCR
• The tax treaty in force allows for the spontaneous exchange of information with France
• The country formally indicates that it undertakes to voluntarily send the returns filed by the ultimate parent entities resident in their countries

For further information please contact:

Vanessa Raindre, Tax partner, MD Legal, Paris, France
Email: vanessa.raindre@mdlegal.fr

PFIC rules: US passive foreign investment company rules

27.06.2022

Many taxpayers are surprised to learn that they are investors in a passive foreign investment company and that this can have negative tax consequences. The experts from Marcum LLP* can provide a detailed analysis of a taxpayer’s PFIC exposure, US tax liability from PFIC investments, and planning opportunities to improve their effective global tax structure.

US PFIC rules are meant to curtail the deferral of current US taxation on passive investments. A PFIC is defined as a foreign corporation that is owned less than 50% by US person(s) and:

• generates primarily passive income (i.e. 75% or more of its annual gross income is passive income) or
• has primarily passive assets (i.e. 50% or more of the average percentage of assets generate passive income).

Disadvantages of owning a PFIC

• US taxation on certain distributions from a PFIC may be taxable at the maximum rate of 37% plus interest for US individuals regardless of their graduated income tax rate;
• 20% long term capital gains (“LTCG”) rates are not available on the sale of PFIC shares; and
• Generally, tax-free transactions with PFICs are disallowed (e.g., mergers).

Contact us for an analysis of your global tax burden or other international matters.

Benny Taveras, CPA, Marcum LLP*, Miami, Florida, USA

Common PFIC Pitfalls

The following are the most common investment scenarios that trigger PFIC status:

• Foreign pensions or life insurance policies that hold underlying investments in foreign entities, such as foreign pensions that hold foreign ETFs or unit linked insurance plans (“ULIPs”);
• Foreign real estate companies that rent properties, but do not have their own active employees to manage such properties; and
• Foreign corporations that offer a separate class of stock to fund the acquisition of passive income-generating investments.

Exceptions and elections that may apply to PFICs

Exceptions

• Start-up rule:
  • Not a PFIC for the “start-up year” (i.e., first taxable year such corporation earns gross income) if it was not a PFIC in prior years or two years after the start-up year.
• Change of business rule:
  • Not a PFIC if it was never a PFIC, and it sold its trade or businesses to start a new venture that will not be a PFIC.

Elections:

• QEF election:
  • By having an annual inclusion of the PFIC’s ordinary and capital gains income by the US shareholder, regardless of distribution, the PFIC rules can be avoided. Note that the PFIC’s income must be calculated on a US basis and the books and records of the company must be available for IRS inspection.
  • Future distributions of previously taxed amounts are not taxable again upon distribution.
• Mark-to-market election:
  • By having the US taxpayer include the annual built-in stock gain of the PFIC, the taxpayer may also be able to avoid the PFIC rules. Note that this exception is only available if the PFIC’s value is easily obtainable on the open market.

For further information please contact:

Benny Taveras, CPA, Marcum LLP*, Miami, Florida, USA
Email: benny.taveras@marcumllp.com

*Marcum LLP is the exclusive associated partner of ECOVIS International for accounting, tax and audit in the United States of America.

 

Cybercrime Germany – increasing prosecution for a worldwide phenomenon

23.06.2022

In 2021, the police registered more than 146,000 cyber-attacks in Germany alone. To be able to identify and convict the people behind these attacks, which were often launched from abroad, the German public prosecutor’s offices are upgrading and investigating together with the local authorities abroad.

In the age of the Internet of Things, cybercrime can take place anywhere. The almost limitless availability of the internet makes crime possible wherever people can use computers or smartphones. In the office, at home and on the street – a kind of “crime to go”. Moreover, the crime scene is not necessarily identical with the place where the crime is committed because it takes place in the virtual world – hundreds of kilometres can lie between the two. However, if the victim is based in Germany, the offence is also punishable under German criminal law, explain the Ecovis lawyers.

German prosecutors are taking action against cybercrime from abroad

Due to this special feature of the criminal law, there are now an increasing number of cases in which the German public prosecutor’s office is also investigating abroad in close cooperation with the local authorities.

Technically, a distinction is made between “cybercrime in the narrower sense” (crimes directed against the internet, data networks, information technology systems or their data) such as the use of malware, spam and phishing, or the creation of fake websites and “cybercrime in the broader sense” (crimes committed by means of information technology). Money laundering and cryptocurrency fraud may also fall under the definition of cybercrime.

In Germany, due to the increase in cases in the field of cybercrime and due to the complexity of the cases, separate investigation units have been formed at public prosecutor’s offices, e.g. the Central Cybercrime Unit Bavaria (ZCB).

Are you under investigation for cybercrime in Germany? We defend you against the charges in Germany.

Janika Sievert, lawyer and specialist in criminal law and tax law, Ecovis L+C Rechtsanwalts GmbH, Wuerzburg, Germany

An example: How investigators work with their colleagues on location

Bavarian media recently reported on one such special unit case (Bayerischer Rundfunk, retrieved 16.02.2022, only available in German). The case led to the arrest of 11 members of a group acting in Georgia and Tel Aviv and pretending to invest funds profitably in online platforms worldwide.

Following a report from an injured party from Bavaria, the special unit of the public prosecutor’s office took over the proceedings already pending on the online platforms and contacted the competent local investigating authorities with the help of Eurojust. The evidence gathered in Germany and abroad led to the issuing of arrest warrants by the Bamberg district court. After the arrests, extradition was requested. The accused are now awaiting criminal proceedings in a German court.

The high degree of specialisation of the investigating authorities also requires specialist defence for the accused. As experienced criminal defence lawyers in white-collar and criminal tax law, we also defend such complex cases throughout Germany.

For further information please contact:

Janika Sievert, lawyer and specialist in criminal law and tax law, Ecovis L+C Rechtsanwalts GmbH, Wuerzburg, Germany
Email: janika.sievert@ecovis.com