Double Taxation Relief: France: how relief is calculated
Relief is given based upon the principle of home state primacy; that is the UK will give relief for any French bank levy charged upon entities in the UK chargeable to the bank levy.
As both the French bank levy and the bank levy are charges upon group balance sheets the amount of relief will be based upon the proportion of the group balance sheet that is chargeable to the bank levy as compared to the total group balance sheet.
Regulation 5 of SI2012/458
Calculating the amount of relief due requires 4 steps to be undertaken:
Determine the assets (‘A’) that underlie the French bank levy. Normally this figure will come from the consolidated balance sheet of the ultimate parent for the chargeable period.
However if the ultimate parent is outside France, the assets figure will come from the consolidated financial statements for the chargeable period of the intermediate parent that is subject to the French bank levy. Where the intermediate parent does not prepare consolidated accounts, the assets will be the total of all assets recognised in the financial statements for the chargeable period of all the entities subject to the French and UK levies. (See diagram 1 (Word 31KB)).
Determine (‘B’) the UK assets as at the end of the chargeable period of the entities subject to the French bank levy. UK assets are defined in Regulation 6 of SI2012/458 and are essentially the assets of any entities that give rise to Type A liabilities (BKLM322100), Type B liabilities (BKLM322200), Type C liabilities (BKLM322300) and Type D liabilities (BKLM322400). This ensures that relief is limited only to entities that fall both within the charge to the UK bank levy and the equivalent French levy.
The French bank levy paid in relation to the chargeable period is then calculated (‘C’).
In most cases this calculation is straightforward as the period to which the French bank levy relates will be the same as the chargeable period, as both will be based upon the period of account of the group parent.
However, it may be that in some cases, the French bank levy relates to a period which is not the same as the chargeable period, such that part of the French bank levy paid will relate to another chargeable period. Where this is the case the French bank levy paid is apportioned between the various chargeable periods on a time basis. Example A shows how this process works.
See Example A below.
The amount of credit is then calculated using the formula (B/A) x C.
So assuming that the accounting period is the same as the chargeable period the calculation is as follows in Example B.
See Example B below.
Bank of Tomorrow Inc is a US headed banking group which produces consolidated group accounts at 31 December each year.
Bank of Tomorrow Inc holds a French subsidiary called Banque Demain SA. It prepares accounts at 30 June 2015 and at 30 June 2016 and its French bank levy is based upon these accounts.
In turn, Banque Demain SA holds a UK subsidiary called Bank of Tomorrow UK Ltd. Bank of Tomorrow Ltd, like its group parent, also prepares accounts at 31 December each year.
The chargeable period for Bank of Tomorrow Ltd is based on the group parent’s consolidated financial statements and will therefore be the period ending 31 December 2015.
C is therefore calculated as follows for the chargeable period to 31 December 2015:
|French levy for APE 30/6/2015||300|
|Attributable to UK chargeable period [300 x 6/12] =||150|
|French levy for APE 30/6/2016||200|
|Attributable to UK chargeable period [200 x 6/12] =||100|
|Total French levy attributable to chargeable period ‘C’ =||250|
Banque Toujours has a total balance sheet size of 140 (‘A’)
It has a UK sub-group with a balance sheet size of 56 (‘B’)
Banque Toujours has paid French levy of 90 (‘C’).
(See BKLM740160 for details of which balance sheet to use to determine the French levy.)
The amount of French bank levy that can then be relieved in the UK is:
56/140 x 90 which in this case = 36