Tax Treaty Case Law around the Globe 2018

S. 363Chapter 30 France: Loss-Making Companies and the Deductibility of Taxes Paid Abroad

Marilyne Sadowsky

30.1. Introduction

This decision of the Supreme Court deals with the question whether foreign taxes are deductible from the French Corporate Income Tax (CIT) base according to domestic law, whereby a French taxpayer in a loss-making position may not make use of the tax credit provided under the applicable bilateral tax treaty. By delivering a decision in the affirmative, the Supreme Court created the possibility for loss-making companies to deduct the taxes they had paid abroad. However, the opportunity was short-lived, as the financial law of 2018 removed this option.

30.2. Facts of the case

Givenchy is a company within a tax-consolidated group headed by LVMH Moët Hennessy Louis Vuitton (hereinafter LVMH), and is based in France. Givenchy received royalties concerning the manufacture and marketing of their products from a number of countries: China, Italy, Japan, Korea, Mexico, New Zealand and the United States. On the grounds of article 39(1) (4) of the French tax code (FTC), the company deducted the withholding taxes paid on these royalties from its CIT base. In the French tax author...