France: Recent modifications to the Amendment Charasse

Hervé Israel is a partner in Lovells’ International Tax Practice, based in the Paris office.

Article 223-B of the French tax code (FTC) sets out the mechanism for the recalculation of tax group results known as the ‘Amendement Charasse’. This operates when a company acquires the shares of another company, which becomes a member of the same tax group, from either the shareholders (individuals or legal entities) who control the first company, directly or indirectly, or from the companies which are controlled, directly or indirectly, by these shareholders. In this situation, the Amendement Charasse requires the financial expenses of the companies belonging to this group, considered to be related to the acquisition, to be added back to the tax group result. These expenses are estimated for each fiscal year according to the ratio of the purchase price of the shares to the average of the liabilities of the tax group during the fiscal year. The Amendement Charasse has recently been extensively modified, notably by the Amending Finance Acts for 2005 (art 40) and 2006 (art 82-II) and Hervé Israel describes the developments of the past two years.