With previous experience as a tax inspector, JJ met many new clients needing help assessing their tax problems.
“As a former tax inspector, I can give them special insight into how their specific circumstances might be analysed by the tax authorities. They need to anticipate how the French Government will handle their situation.
“Being able to anticipate the tax authorities’ viewpoint gives them an edge and helps them feel more secure.”
He speaks more on reformations the French Government must make, in order to benefit the business world.
With this prior experience, what are important aspects you commonly see business people misjudging or being unaware about?
One particular aspect of business restructuring is the pivotal role played by a holding company. The French Holding Regime is very competitive in relation to those in place in other European countries and is very often the key player in a restructuring plan.
Another aspect of the French Regulation that foreign investors are not aware of, is the leeway that many articles of the tax code leave to the taxpayers. They often do not know they have a choice to find the most effective restructuring. They may also have different options when it comes to tax returns filing. I have published an article about this unawareness entitled: ‘France Can Be a Tax Heaven for Expats’. It is a bit provocative but relates to this lack of awareness that tax law is very flexible.
Are there any common business regulations international companies are unaware about? How does this lead them towards litigation or legal cases?
There is indeed a specific trap that I often see international companies entangled in. This could be known as “shadow permanent establishment” and is where a foreign company has some commercial interest in France and has set up an outlet or a warehouse; at the beginning, this structure is not very significant and does not equal a complete up and running legal entity. The problem is the grey zone where the company moves from a tiny outlet to a situation where the tax authorities will consider that they operate like a domestic company, given the size of their operation, the number of employees or the amount of their revenue etc. This can trigger a tax audit that results in heavy penalties.
To prevent this from happening, foreign companies should never let out-of-France advisers organise their French operations.
What are three tips you would offer to ensure your client invests in the economically best way possible?
- What is of paramount importance is that you set your goals. There is no “perfect structure” or “best solution". The only perfect answer to all of the questions that a foreign company may ask, is the one that will help them reach their goals. This is not specific to France though; every legal adviser or attorney is frequently asked the same question, "What is the best structure?", and the answer is always, "It depends." Set your goals first and then try to find the best solution that will fit your needs.
- Then, there is the importance of being consistent. At some point a company and its managers have to tell a story to the Government and to the different agencies that assess their situation. They have to explain why they operate in a particular manner, why they file some returns but not others. They have to demonstrate the nature and the legal qualification of transactions. Their answers must be the same from different angles and at different times. Consistency is what separates companies at risk for a tax audit, from others.
- Finally, there is the necessity to understand that when it comes to legal and tax organisation, at some point, form trumps substance. Many regulations demand that companies respect deadlines to file tax returns, keep accounting books in a particular way and convene a general assembly etc. These legal obligations, when they are met, are seen as signals that a particular company is in good standing with the government and its agencies.
Are there any regulations you are hoping to see change, that will help your role at the Paris Bar?
Wealth Tax: If not repealed, Wealth tax will be deeply amended by the new government. The business community has pushed hard for years to have this done because it is a deterrent for investors that makes things difficult to consider France as an investment-friendly country.
Labour law: This is another legal area that is under serious scrutiny in an effort to fluidify the employment market and to no longer put French companies at a disadvantage.
Protection of tenants: Investors constantly complain about the laws and regulations that prevent landlords from evicting non-paying tenants. In this respect, we consider investors are still better off when investing in the US or in other parts of Europe than in France. As a rule, it is preferable to buy a property in France when the investment is private.
Since I have set up my private practice, I assist, represent, and advice clients with a special emphasis on the strategy options either during transactions or during litigations.
Being registered with the Paris Bar as Attorney Agent in Real Estate Transactions, I provide a full range of services to clients willing making investments in France. Thanks to a new regulation issued by the Paris Bar, I now may assist clients willing to invest in real estate throughout France and even abroad. A French Tax Attorney may now assist a client the same way a Real Estate Agent would and at the same time, providing Legal and Tax advice to optimise their investment.
Jean-Jacques Michallon
J2M law firm
Email: jjmichallon@icloud.com
Instagram: @RealtyScope
Tel: +33 142 250 848
