Recent Case Law Affecting French CFC Rules

During the last 15 months or so, French tax courts have issued various decisions that may have a significant impact on the application of the French CFC rules (article 209 B of the French tax code (Code général des impôts, or "FTC")).

Basic Operation of the French CFC rules. The French corporate tax rules are on a strict territoriality basis, i.e., only profits generated in France are liable to tax.

Article 209 B introduces an exception to the above territoriality principle, and it may be summarized as follows:

• If a French corporate taxpayer owns, directly or indirectly, more than a certain threshold (currently 50 percent) of the share capital or voting rights or financial rights of a non-French entity; and