Following the judgment by the Court of Justice of the European Union (CJEU) on 12 June 2014 regarding the Dutch tax consolidation regime, the French tax consolidation regime has recently been modified. The new provision constitutes 'horizontal tax consolidation' for French companies owned by the same parent company (foreign parent company) located in another EU member state or in the European Economic Area.
To elect for 'horizontal tax consolidation' three main conditions must be met:
1. The French companies that are part of the French tax group must be owned for at least 95%, directly or indirectly, through intermediary companies, by a foreign company that is subject to corporate income tax in another EU country, Iceland, Norway or Liechtenstein.
2. The share capital of the foreign parent company shall not be owned for 95% or more by another French or EU company that is subject to corporate income tax in its jurisdiction. The chain of ownership only contains 95% held corporation, and only top EU corporations are eligible to qualify as foreign parent company.
3. The financial years of all intermediary companies (between the foreign parent company and the French group members), must have financial years of 12 months with the same opening and closing dates.
This new provision comes into force for financial years closed on or after 31 December 2014.