France Creates Own Tax Blacklist

February 18, 2010 International Tax CooperationOffshore BankingOffshore TaxationTax HavensTaxation in France

Christine Lagarde - World Economic Forum Annual Meeting Davos 2009Recently released documents have revealed that the French Government has drawn up a list of 18 nations which it deems to not have adequately complied with international taxation and fiscal standards. French organizations carrying out financial transactions with any of the listed jurisdictions will be faced with significant punitive tax measures.

In a document signed by Christine Lagarde, Economy Minister of France, and Eric Woerth, Budget Minister of France, and made public on February 16th, the Government announced that dividends, service fees, royalties, and interest paid by a French entity to a beneficiary in a blacklisted country will be faced with a 50 percent tax. Gains from real estate and securities transactions, made in one of the 18 countries for a French organization, will be subjected to the same levy. Further, France’s 95 percent tax exemption on dividends issued by subsidiaries to their French based parent company will be removed if the subsidiary resides in any of the sanctioned jurisdictions. The new tax protocols will apply from March 1st 2010.

The blacklisted nations are: Anguilla, Belize, Brunei, Costa Rica, Dominica, Grenada, Guatemala, Cook Islands, Marshall Islands, Liberia, Montserrat, Nauru, Niue, Panama, Philippines, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and Grenadines.

The new law holds a condition that a review will be held on January 1st 2011, which will gauge the fiscal compliance progress of the jurisdictions and possibly remove the sanctions. Criteria for reconsideration is similar to that of the OECD’s black and grey lists, which classifies a country by the number of Tax Information Exchange Agreements it holds.

Photo by World Economic Forum