A posted worker (« salarié détaché ») is an employee established and carrying out his activities outside of France. He usually works for an employer outside of France and executes his work at the demand of this employer for a limited duration of time in France (Article L.1263-3 of the French labor code “Code du travail”).

Cross-border posting of workers is provided for in the articles L.1261-1 to L.1263-2, R.1261-1 to R.1264-3 of the French labor code (“Code du travail”) that results from the transposition of the EU directive 96/71/CE of the 16 December 1996 as well as the execution directive 2014/67/EU of the 15 May 2014.

These directives guarantee a minimal protection for working conditions of these employees and specify the control modalities.

PRELIMINARY CONDITIONS:

All employers settled in another country can undertake service provisions in France and post employees without having to settle on the territory as long as in their home country:

• They are regularly settled as well as constituted and operated in conformity with the legislation of that country. The legal status of the company is indifferent; this applies to any type of company.
• They must justify of an important activity that is stable and continuous. Article L.1262-3 of the French labor code (“Code du travail”) prohibits the creation of an establishment in the only purpose of posting employees.

These rules do not apply to activities that concern exclusively the internal management or administration of the company or if the activity is usually executed on the national territory.

The employee must have been an employee in his home country before his posting.

FORMALITIES TO ACCOMPLISH:

The obligation to the prerequisite declaration of the posting by the home employer:

The home employer must address a territorial unity declaration of the country in which the service will be provided or of the first location of the activity if it is carried out in other locations. This must be done before the beginning of the service provision or before the availability of the employee (article R. 1263-5 of the French labor code “Code du travail”).

This declaration can be done by any mean as long as is confers a specific date and applies the necessary mentions of article R.1263-4 or R.1263-6 of the French Labor code (“Code du travail”).

However, CERFA forms, online declarations via the SIPSI tele service are not to this day in conformity with the 5 November 2015 decree.

Copies must be enclosed in the staff’s unique registry and must be made accessible to employee representatives either on the premises or on each construction site or place of work that are distinct to the premises where the posted workers are assigned (article D.1221-24-1 of the French labor code “Code du travail”).

If this declaration is not respected, the work inspector can impose an administrative fine from 2000 EUR up to 500.000 EUR by employee (Article L.1264-1, L.1262-2-2, and L.1264-3 of the French labor code).

The obligation to designate a company representative in France by the employer:

The employer must designate a representative in France in charge of ensuring contact with the work inspector, police officers, tax and customs agents during the duration of the provision (L. 1262-2-1 of the French labor code).

This representative will provide the necessary documents requested by the work inspector.

By not designating a representative in France, the employer risks a fine by the regional department of companies, competition, consumption and work (“DIRECCTE”) from 2000 EUR up to 500.000 EUR by employee (article L.1264-1, L.1262-2-1, L.1264-3 and L.1262-5 of the French labor code).

Obligation to verify the accomplishment of formalities by the developer (“maître d’ouvrage”) or the principal (“donneur d’ordre”):

The developer (“maître d’ouvrage”) or the principal (“donneur d’ordre”) must ensure that the employer of posted employees has made the posting declaration.

They will ask the subcontractor (“sous-traitant”) or the established supplier in a foreign country a copy of the posting declaration and a copy of the document designating the representative (article L.1262-12 of the French labor code).

If they do not possess copies, they must proceed to a posting declaration in the 48 hours following the beginning of the posting in the territorially united location of the provision (article L.1262-4-1 of the French labor code).

Article R.1263-13 of the French labor code specifies the informations that must be contained in these declarations.

Obligation to ensure the payment of wages of posted workers:

If the posted employee has not received the minimum legal pay, the developer (“maître d’ouvrage”) or the principal (“donneur d’ordre”) can be held jointly responsible with the employer for the payment of wages and benefits owed to the employee if the situation is not resolved in a specified time-limit.

The developer of the principal must inform this by writing to the control agent that noticed this default.

It is mandatory to indicate the information of the posting in the staff registry and the social accounting (“bilan social”).

A copy of the posting declaration needs to be enclosed to the official staff register of the host company. The number of posted employees must be included in the social accounting (“bilan social”).

Building and construction employees’ obligation to possess a professional card:

The employer will have to declare to a body (that will be determined in a future decree) each employee that accomplishes building or construction work in order to have a professional card made.

This card will contain informations concerning the employee, his employer, the host company, the home company and the body that delivered this card (Article L.8291-1 of the French labor code).

INSPECTION:

All the documents (translated in French) concerning informations of the regularity of the social situation and wages that allow the work inspector to carry out his inspection must be kept at the place of work of the posted worker or in the event of a material impossibility any other accessible place to his representative.

In the event of serious violation of social rights of posted workers, the work inspector can order by writing and through the established representative in France, the suspension of the situation during 1 to 3 days.

If this situation is not settled by the employer, the suspension of the posting during a maximum of one month can be ordered (articles L.1263-4 and R.1263-11-2 of the French labor code).

The status of the posted worker:

Employer’s that are established in another country must respect the legislation applicable in the host country: France. They must apply the French Labor law concerning the fields provided for in article L1262-4 of the French labor code (individual and collective liberties in work relations, discriminations and professional equality between men and women, maternity protection …..).

The rules that are applied to French companies in the same sector must be applied to the posted worker. Article R1261-1 of the French labor code specifies it: a posted worker carrying out an activity in France must benefit from the same protection as a French worker carrying out the same activity.

In the presence of a subnational agreement plan (“dispositif conventionnel infranational”), the location of the service provision is the territorial criteria that allows to determine the referring agreement texts.

The employer will have to inform the employees of the collective agreement that will be applicable to them during their posting in France. The mention of this title must be specified in the wage statement.

Earnings:

Posted workers are at least paid the minimum wage (“SMIC”) or the minimum standard wage.

The minimum salary includes benefits for posted workers as for example the expatriation bonus. (Article R1262-7 of the French labor code).

Medical monitoring:

The detached worker benefits from the provision of work health services except if the employer established in an EU member State proves that the worker is subject to an equivalent medical monitoring in his home state.

Concerning work related accidents (article R.1262-2 of the French labor code):

• If a posted worker is not affiliated to French social security, a declaration is sent to the work inspector of the place of occurrence of an accident in the 48 hours (this does not include Sundays and bank holidays) by registered letter with receipt;
• If the worker is posted in France for his employer without being appointed to a specific company, this declaration is sent by the employer to one of the representatives;
• If the worker is posted in another company, the host company fills this declaration.

Exceptions (article R.1262-5 of the French labor code):

Posted workers do not benefit from:

• Unpaid leave of absence
• Time savings accounts (“compte épargne-temps”) implemented in the host company

The posted worker that is not affiliated to French social security cannot obtain rights for the “compte de prevention de la pénibilité”. The declaration of risks will have to respect specific modalities that will be specified in a future decree.

fichier à telecharger:
160317 The posting of workers in France_0

1. Scope of Wealth tax or solidarity tax on wealth (“ISF”) :

The solidarity tax on wealth (“ISF”) has to be paid by individuals whose estate, globally appreciated at the level of the different individuals subjected to a common declaration, exceeds the taxation threshold.

The individuals that reside outside of France are taxed only on their goods that are located in France.

The taxation threshold is set at 1 300 000 EUR (Article 885 A of the French Tax Code “CGI”). The individuals whose net estate taxable on the 1st of January is equal or inferior to this sum are not subjected to the solidary tax on wealth (“ISF”).

A. Taxable individuals:

This solidarity tax on wealth (“ISF”) is only subjected to individuals.

Legal entities are not subjected to this tax and thus do not need to apply for a declaration.

However, equity and shares in capital of companies are taxed by the solidarity tax on wealth (“ISF”) for the partners unless they benefit from an exemption (especially interests constituting professional property). This also applies to shares of companies with no legal personality.

Married couples are subject to a common taxation of the solidarity tax on wealth (“ISF”) except in two situations:

• If the couple have separated their marital property (“séparation de biens”) and do not live together anymore
• If they are going through divorce proceedings or judicial separation (“séparation de corps”) and have been allowed to have separate residences

Civil partners (“Pacte Civil de Solidarité PACS”) are also subjected to this tax.

Cohabiting partners (“concubins”) (in a stable and continuous relationship between two persons living as a couple) have to pay this tax unless one of the partner is married to another person.

The property of minor children are subjected to this tax with the property of their parents that have the legal administration of their property. If the parents are separated they will have to pay half of this tax whilst they share parental authority. The constitution of the tax household is appreciated on the 1st of January of the taxable year.

Individuals that have their tax domicile in France have a fiscal obligation for all their properties located in and outside of France.

However, as long as the solidarity tax on wealth (“ISF”) is paid for goods located outside of France, individuals will not have to pay this tax twice for those specific properties.

If individuals have transferred their residence in France, after having been fiscally domiciled in a foreign country since the last five years, they are temporarily taxable on only their French property.

Individuals that reside outside of France are only taxable on their property located in France. (Their financial investments are exempted).

The tax domicile is either defined by international applicable agreements or Article 4 B of the French Tax Code (“Code général des impôts”).

B. Taxable property:

1. Constitution of the estate:

All property despite their nature are subject to the solidarity tax on wealth (“ISF”).
The constitution of the estate is appreciated at the date of the chargeable event (“fait générateur de la taxe”) on the 1st of January of the taxable year.

Changes in the estate that occur between the 1st of January and the date of the tax declaration will not be taken into account to determine the basis of taxation.

The proof of the property is regulated by several presumptions. The owner designated in an act is considered as such. The one that possesses personal property is considered the owner. The ownership of a property gives a right to things that unite incidentally to the property.
These presumptions can of course be discredited by rebuttal evidence.

Property detained by a procedural representative (“mandataire”), a trustee, a guardian or a pledgee (“créancier gagiste”) are not taxable.

Property burdened by usufruct (“usufruit”), a right of residence (“droit d’habitation”) or an easement (“droit d’usage”) personally granted are included in the estate of the tenant for life (“usufruitier”) or the owner of the right for the value of the full ownership. However, that property will only be taxable on the fraction of the full ownership they are entitled to.

2. Exemptions:

Several categories of property are exempted from this taxation.

Art, antique and collectible objects as defined by the Common customs tariff (“tarif douanier commun”) are exempted and thus do not have to be declared.

The author of literary and artistic property rights and those that own rights related to copyrights are also exempted from this tax.

However, the successor in title of the author will have to take into account the value of their right of entitlement in the tax base.

An inventor or creator’s rights to industrial property will be exempted by this tax. However, this exemption does not cover the successor in title of the inventor or creator unless they prove that those rights are used for a solely professional activity.

Retirement pensions are not taken into account in the taxation of the solidarity tax on wealth (“ISF”).

Finally, an exemption exists concerning the capitalization value (“valeur de capitalisation”) of life annuities (“rentes viagères”) constituted as part of a professional activity or an individual retirement account (“plan d’épargne retraite populaire PERP”) that are ensured at standard premium rates regularly graduated in their amounts and their periodicity during a period of fifteen years and whose commencement date intervenes at the earliest from the award of the pension of the taxable person or at the legal age of retirement (article 885 J of the French Tax Code “CGI”).

Only compensation for bodily damage received by capitalization value of annuity or compensation is exempted not compensation for material damage.

2. Tax base and calculation:

The solidarity tax on wealth (“ISF”) is based on the net value of imposable property.

A. Assessment of taxable property:

The taxable person has to assess their estate on the 1st of January of the taxable year subject to controls by the administration.

The value to declare has to be done at current value.

For taxable property located in foreign countries, they will be assessed in the same conditions as property located in France.

A reduction of 30% will be applied to the current value of a building if it is occupied on the 1st of January of the taxable year as main residence by its owner.  The assessment of buildings classified as historic monuments will take into account specific constraint they are subjected to (openness to public, considerable maintenance expenses).
Household furniture can be assessed either by:

• An appraisal of the taxable household furniture in a simplified inventory. This appraisal is valid three years, however, significant changes must be notified
• A global assessment in one number without having to specify the value and nature of the different objects.

Quoted transferable securities (“valeurs mobilières cotées”) are assessed according to the last known rate or according to the average of the last thirty rates before the 1st January of this year.

Non quoted transferable securities (“valeurs mobilières non cotées”) need to be declared.
Real estate company security (“titres de sociétés à preponderance immobilière”) are assessed without taking into account the detained debt, directly or by of one or more intermediary person, by its non-resident companies.

Saving bonds (“bons d’épargne”) need to be declared at their face value (“valeur nominale”) except for the accrued or non-received interests on the 1st of January of the taxable year.

B. The deduction of liabilities (“passif”):

For liabilities (“passif”) to be deduced they need to exist on the 1st of January of the taxable year, they need to be personably invested by the taxpayer and be justified by every means of evidence compatible with the written procedure.

The deduction of taxable liabilities will concern:

• The taxes whose taxable event is at the latest on the 1st of January of the taxable year and that need to be paid at that date;
• Loans for an amount equal to the capital owed on the 1st of January of the taxable year increased by accrued and unpaid interest as well as interests running at that date;
• Bank overdrafts on the 1st of January or a company’s receivable accounts (“comptes débiteurs”);
• Debts, invoices or fee notes before the 1st of January and that have to be paid at that date;
• The capital of life annuities (“rente viagères”) that is payable by the taxpayer;
• The value of capitalisation of a provision of compensation (“prestation compensatoire”) in the event of a divorce or a maintenance allowance (“pension alimentaire”);
• Maintenance margin (“dépôt de garantie”) received by tenants at the beginning of the tenancy.

The taxpayer will have to attach to their declaration all the elements justifying the existence, object and amount of debts where the deduction is applied.

The administration can ask for precisions in light of tax inspection.

C. Tax calculation:

The amount of the tax is calculated by applying to the net value of the taxable estate the rate of article 885U of the French Tax Code (“CGI”).

The calculated tax can be reduced according to the undertaken investments and can take the form of a levelling-off (“plafonnement”) according to the taxpayer’s income.  Wealth tax (“impôt sur la fortune”) paid in a foreign country will also be deduced.

The levelling-off (“plafonnement”) allows to avoid that the total of the solidarity tax on wealth (“ISF”) and the income tax (“impôt sur le revenue”) does not exceed 75% of the earnings of the previous year. In the event of excess, it will be reduced from the solidarity tax on wealth (“ISF”) to be paid.

The taxes to be paid in France and abroad for the earnings and products of the previous year to the payment of the solidarity tax on wealth (“ISF”) will be taken into account for the calculation of the levelling-off (“plafonnement”).

Nicolas BRAHIN
Avocat au Barreau de Nice
Nicolas.Brahin@brahin-avocats.com

Donations & Legacies

1. Principles

According to Article 893 of the French Civil Code, a liberality is the action by which a person gives , free of charge, all or part of his or her assets or his or her rights to the benefit of another person. Liberalities are possible only between living people or by will.

1.Gradual and residual liberalities

Gradual liberality (Article 1048 et seq. of the French Civil Code):

A gradual liberality is a donation or a legacy through a first person, the first done/legatee,who :

• is in charge of keeping the asset

• ; and to pass it on at his or her death to a second person, the second donee/legatee.

This second done is already named by the donor who made a donation / legacy to the first donee.

In fact, only the second donee is considered as the actual donee. The first donee does not have any right to dispose of the assets given by the donor/testator.

Moreover, Article 784 C of the Tax Code (Code général des impôts), provides that the first donee/legatee shall pay the fees linked to the donation and the second donee / legatee shall in principle not pay any fees. In fact, at death of the donor/testator, the first donee / legatee pays the relevant taxes and fees according to the degree of kinship existing between the testator/donor and him or herself.

At death of the donee/ legatee, the mentioned assets are transmitted to the second donee / legatee. However, the taxes paid by the first donee/legatee benefit the second donee / legatee who may deduct these paid taxes accordingly from the taxes that he or she would have been liable to pay.

This could thus be a convenient way to pass on e.g. secondary residences at the Côte d’Azur to grand-children.

Residual liberality (Article 1057et seq.of the French Civil code):

A residual liberality is a donation or a legacy through a first person, the first donee/legatee,who :

is in charge of keeping the donated asset(s); and to pass the remaining part of the asset(s) at his or her death, to a second person, the second donee/legatee.

Also, in this case, only the second donee/legatee is considered as the actual donee/legatee.

However, the first donee/legatee has the right to dispose of the assets given by the donor.

Consequently, the first donee/legatee can even sell the given asset(s). The second donee/legatee will not have any right on the price; the second donee/legatee will only have the right to any remaining part of the assets given by the donor/testator.

As above, Article 784 C of the Tax Code applies also in this case.

2. Cash donations

According Article 7 90 G of the Tax Code (Code général des impôts) children, grandchildren, a great grandchildren or, in lack of such descent, nephews or nieces, grand nephews or grandnieces may be granted cash donations up to the amount of 31 865EUR every fifteen years exempt of transfer fees.

This exemption is subject to the following conditions:

the recipient is at least 18 years old or emancipated at the day of transmission.

since 31 July 2011, the donor must be aged less than 80 years old, regardless of the quality of the recipient.

This exemption is not ably cumulative with rebates provided under points I and V ( respectively donations to children and to nieces or nephews) of

Article 779 and in

Articles 790 B (donations to grand-children) and 790 D (donations to great grand-children) of the Tax Code.

Moreover, according to Article 784 of the

Tax Code, cash donations made since at least 15 years are not taken into account. If the donation is not certified in a deed, the donation must to be registered within a month following the release of the funds under form nr 2731.

3. Donation of property that has been returned to the donor

Article 791 ter of the Tax Code together with the

Doctrine of the Tax Administration (BOI-ENR-DMTG-20-30-20-60)provide that where the donee (direct desendant) passes away and where the asset(s) goes back into the patrimony of the donor, either based on the legal right of return of the father and the mother (Article 738-2 of the French Civil Code) or the contractual right of return (Article 951 and 952 of the French Civil Code), the donor can either: redonate,to another direct ascendant,the asset “tax free”, without any tax payments within 5 years, date to date,as from the day the asset returned to the donor ; or ask for the restitution of the taxes paid for the donation before 31 December the second year after the asset returned to the donor.

4. Deadline of the tax recall concerning donations

According to Article 784, second subparagraph of the Tax Code,and since 17 August 2012,Tax Administration may reintegrate a donation within the tax base of a succession where the donation was not made since more than 15years.

Consequently, if a donation was made less than 15years ago, it will be reintegrated in the tax base for the succession. There is no smoothing mechanism, i.e., no proportionality mechanism is applied.

II.

Duty rebate Since July 31, 2011 the tax deductions based on the age of the don or do not exist anymore. <However, according to Article 790 of the Tax Code a deduction of 50% applies for the transmission in full ownership of the companies within the family when the donor is under 70 years of age and where certain conditions are met.

III.

Passing on companies Heirs, legatees or donees may benefit of an exemption on the transfer taxes free of charge up to 75% of the value on the shares of a company with industrial, commercial or artisanal, agricultural, professional activity transferred among living or by will, or on a ll or an indivisible part of the whole of movable or immovable property , tangible or intangible property allocated to the exploitation of an individual company with an industrial, commercial, artisanal, agricultural or professional activity transmitted by death or between living people under the respect of :

I.

Preliminary conditions linked to the duration of detention of shares / an individual company by the donor : collective commitment to keep a certain amount of shares (between 20% and 34%) for 2 years; or to the detention of an individual company for at least 2 years.

II. The condition linked to an individual commitment of the heir, donee or legatee to keep the shares or the assets needed for the operations of the company during four years.

III.

Condition linked to the commitment to pursue the activity during three years :

Where shares are transmitted: one of the associates who signed the collective commitment or one of the heirs, donees or legatees who signed the individual commitment, must exercise, during the duration of the commitment and during three years after the transmission of the shares :

• either his or her professional activity in a limited partnership; or

• when the company is subject to corporate taxation, one of the executive functions among those listed in Article 885 O bis 1° of the Tax Code.

Where an individual company is transmitted: one of the heirs, donees or the legatees must pursue the activity during three years since the transmission.This partial exemption up to 75% can combined with the fees deduction of 50% applicable to the donations of the shares in full ownership when the donor is under 70 years of age and all the conditions described above are met.

fichier à telecharger:
LIBERALITIES – DONATIONS AND LEGACIES_2014-07-07

In this article you shall find brief explications on how to use a French Real Estate Company (SCI) in order to transfer your property to the younger generations. In the first place, it shall be noted that the SCI can be an excellent “tool to give”. However, where the older generation would like to pass on their property for tax purposes, they might also still want to keep the control of the property. For this purpose, “Golden Shares” in the SCI can be given to the older generation in order for them to have the majority in the SCI.

In the case of a donation, the basic figure is the case where ‘A’ donates a piece of real estate to ‘B’.
Consequently, ‘B’ pays the due taxes (droits de mutation à titre gratuit). At the succession of ‘B’, ‘C’ receives the property and pays, in turn, and again, the same amount of taxes. This can however be avoided through a Gradual Donation (donation graduelle).

A gradual donation is a donation where the initial donor, ‘A’, donates an asset to ‘C’, through a donation to ‘B’. Whereas ‘B’ receives the asset in the first place, he has a prohibition to dispose of it and the obligation, at his own succession, to transfer it, in turn, to ‘C’, who was initially designated as the donee by ‘A’.

As a consequence, ‘C’ is considered to have received the property directly from ‘A’. However, when ‘A’ made the donation to ‘B’, ‘B’ already paid the taxes linked to the donation. ‘C’ must thus in principle not pay any taxes linked to the donation as he or she benefits of a tax credit of the same amount as paid by ‘B’.

Summary

I. SCI – A TOOL TO GIVE

II. SCI AND THE TECHNIQUE OF “GOLDEN SHARES”

fichier à telecharger:
NOTE_SCI_DONATION GRADUELLE_2014-04-14

Donations & Legacies

According to Article 893 of the French Civil Code, a liberality is the action by which a person gives, free of charge, all or part of his or her assets or his or her rights to the benefit of another person. Liberalities are possible only between living people or by will.

1. Gradual and residual liberalities

Gradual liberality (Article1048 et seq. of the French Civil Code):

A gradual liberality is a donation or a legacy through a first person, the first done / legatee, who:

– is in charge of keeping the asset; and
– to pass it on at his or her death to a second person, the second done / legatee.

This second donee is already named by the donor who made a donation / legacy to the first donee. In fact, only the second donee is considered as the actual donee. The first donee does not have any right to dispose of the assets given by the donor / testator.

Summary :

I. PRINCIPLES

II. DUTY REBATE

III. PASSING ON COMPANIES

fichier à telecharger:
SUCCESSION – DONATION – FEES AND SCALES_2014-07-14

Legal opinion about the Financial Law n°2011-1978 of December 28, 2011 for 2012

I – V.A.T (“T.V.A”):

The Reduced-rate (« taux réduit ») of 5,5% is raised to 7% except for the products and services of first necessity (alimentary products, equipments for disabled person…) which continue to benefit from the rate of 5,5%. This new Reduced-rate applies since the 1st of January 2012 for most products and services to which the previous rate of 5,5% was applied. There is a limitative list of products of services which continue to benefit from the rate of 5,5%.

Since the 1st of January 2012, there are 4 rates of VAT applicable in France:

– The normal rate = 19.6%: this rate applies to all the products and services which do not require the application of a particular rate;
– A Reduced-Rate (“taux réduit”) = 7%: for the products and services previously liable for the 5,5% rate;
– A Reduced-Rate (“taux reduit”) = 5,5%: for a list of products listed exhaustively by the law (article 278-0 bis of the French Tax Code (“Code Général des Impôts”)); and
– A specific rate = 2,1%: for press publication, some drugs,…

Summary :

I – V.A.T (“T.V.A”):

II – CORPORATE TAX (“L’IMPOT SUR LES SOCIETES” OR “IS”):

III –PROFESSIONAL CAPITAL GAIN (“PLUS-VALUES PROFESIONNELLES »)

IV – WEALTH TAX (« IMPOT DE SOLIDARITE SUR LA FORTUNE » OR « ISF »):

V – SALE OF BUILDING TO RENOVATE (“VENTE D’IMMEUBLE ACQUIS EN L’ETAT FUTUR DE RENOVATION”)

VI – TRUST

fichier à telecharger:
120117 – Legal opinion about the Financial Law n°2011-1978 of December 28, 2011 for 2012