Taxation: extension of the list of ETNCs (non-cooperative states or territories)

Non-cooperative states or territories (ETNCs) are those political entities that refuse to comply with international standards for the exchange of tax information or whose legislation promotes tax evasion and optimization. Transactions carried out with these States or territories (the list of which is set by decree) are subject to restrictive measures.

There are three criteria for qualifying a State as an ETNC :

1. States and territories that have been evaluated by the OCDE with regard to the exchange of information for tax purposes and that have not concluded an administrative assistance agreement with France allowing the exchange of any information necessary for the application of the parties’ tax legislation, nor signed such an agreement with at least twelve States or territories ;
2. States and territories that are on the Union’s “black” list because they facilitate the creation of extraterritorial structures or arrangements designed to attract profits that do not reflect real economic activity;
3. States and territories included on the European list because they do not meet certain criteria (tax transparency, absence of potentially harmful preferential tax measures, implementation of the “Beps” project).

A decree of January 6, 2020 added the following countries to the list:

– Anguilla

– The Bahamas

– The British Virgin Islands

– The Seychelles

– Vanuatu

– Fiji

– Guam

– The American Virgin Islands

– Oman

– American Samoa

– Samoa

– Trinidad and Tobago

Panama, which was included in the previous list, should be added.

The addition to this list entails the application of certain specific measures from 1 April 2020 for the new countries on the list (Panama is already subject to this obligation), namely :

– A withholding tax of 75% in France on the payment of dividends, interest from French sources in an ETNC. This provision applies regardless of the beneficiary’s residence.

– Royalties and other remuneration for services paid by a French debtor to a beneficiary resident or established in an ETNC are also subject to the 75% withholding tax.

– Finally, capital gains on equity securities of companies established in an ETNC cannot benefit from the exemption from the long-term regime.

Other measures apply to ETNCs, including an enhanced transfer pricing documentation requirement.

 

Maupard Fiduciaire’s team is at your disposal to advise you as best as possible on the impact of this change on your business.

For more information please email our team [email protected]