France's tax authority has released Form 2272-SD and accompanying guidance for reporting Pillar 2 top-up tax, covering the income inclusion rule, undertaxed profits rule, and qualified domestic minimum top-up tax — setting out allocation formulas, centralisation options, and mandatory e-filing requirements to ensure large multinationals meet the 15% minimum effective tax rate across their French operations.
The French tax authority has released the statement of assessment of the supplementary (top-up) tax (Form 2272-SD) and related guidance for reporting supplementary (top-up) tax. The form must be filed by parent or constituent entities subject to the Pillar 2 income inclusion rule (IIR), the undertaxed payment/profit rule (UTPR), or the qualified domestic minimum top-up tax (QDMTT).
This tax form and accompanying instructions detail how tax liabilities are distributed among constituent entities based on factors like employee headcount, tangible asset values, and individual levels of under-taxation. Additionally, it specifies identification requirements for ultimate parent entities and guides electronic filing deadlines and penalties. The administrative framework ensures that groups maintain a minimum effective tax rate of 15% across their French operations.
The key components of this tax filing are:
Types of complementary taxes
The form covers three distinct rules for calculating and paying the top-up tax:
- Rule of inclusion of income (RIR): This tax is owed by a parent entity within the group. It is mandatory for each parent entity liable for RIR to pay it individually; it cannot be centralised or paid by another entity.
- Under-taxed profits rule (RBII): This rule applies to constituent entities when the RIR has not fully captured the under-taxation. The tax is split among French entities based on a specific formula.
- National complementary tax (INC): This is a domestic top-up tax (often referred to as a QDMTT) that ensures entities within France reach the 15% minimum rate before other countries can apply their own top-up taxes.
Liability and centralisation
- Individual liability: Generally, every constituent entity liable for INC or RBII must file its own liquidation statement. Even if a group centralises payment, each entity remains legally liable for its share of the tax if the centralising entity fails to pay.
- Centralisation option: A group can designate a single “centralising” entity to handle the filing and payment for both the INC and RBII for all French members of the group.
- Mandatory e-payment: All payments must be made electronically. Failure to do so results in a 0.2% penalty.
Allocation formulas
The sources detail how top-up taxes are divided among various French entities:
- RBII allocation: The total RBII owed by the group in France is distributed based on two factors: 50% based on the number of employees and 50% based on the net book value of tangible assets.
- INC allocation: This is typically distributed proportionally to each entity’s individual under-taxation. This is calculated by taking the difference between the 15% minimum rate and the entity’s individual effective tax rate, then applying it to the entity’s “excess profit”.
- Exception for INC: If no specific entity is found to be under-taxed under the standard formula but an INC is still due, the tax is allocated based on each entity’s qualified profit.
Treatment of investment entities
Investment entities (EI) and insurance investment entities (EIA) are not directly liable for top-up taxes (INC or RBII). If tax arises due to their under-taxation, another French group entity must be designated to pay it; otherwise, the liability defaults to the French entity with the highest qualified profit.
Filing accuracy and compliance
Form 2272-SD must be fully consistent with the Information Return (Form 2259-SD) to avoid discrepancies or audits. Entities that ultimately owe no tax must still file the form and indicate a nil return (“néant”).
