French tax authorities can consider income that is not “booked” in the accounts of the taxpayer-company for purposes of determining a tax on added value (“Cotisation sur la Valeur Ajoutée”—CVAE) as held by the French Supreme Tax Court (“Conseil d’État”). The amount that the tax authorities can consider income which is not “booked” in the accounts of the taxpayer-company for purposes of determining a value added tax will be related to a transfer pricing re-assessment.
The CVAE is a tax levied on enterprises at the national level, but for the benefit of local councils. The CVAE tax liability is equal to a certain percentage (in general 1.5%, but less for those enterprises with gross revenues below €50 million) of the added value produced by enterprises. The added value is based on the accounts of the enterprise.
In general, re-assessments relating to the CVAE are a deductible tax for corporate tax purpose and relate to the last three years under the statute of limitations for re-assessments.
The Conseil d’État held that application of the CVAE rules does not prevent the tax authorities from questioning the amounts declared with respect to the added value production for the year at issue or with respect to the acquisitions of goods and services from third parties.transfe
