Legal and Tax Innovations on French Financial Markets for ... · foreign pension and investment...

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Legal and Tax Innovations onFrench Financial Markets for

Russian Investors

Legal and Tax Innovations onFrench Financial Markets for

Russian Investors

Moscow, December 9th, 2010

Radisson, Moscow

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Table of contents

1. Legal innovations in France

2. Tax innovations in France

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1. Legal innovations1. Legal innovations

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1. Legal innovations in France1. Legal innovations in France

French Financial markets : an attractive offer

Suitable solutions

NYSE Euronext Paris (focus on Professional compartment)

Alternext

Marché libre

1. Legal innovations in France – Parallels betweenFrance and Russia


Main Russian Stock-exchange Structures:

RTS

RTS Classica Market

RTS Standard

Futures & Options on RTS (FORTS)

MICEX (The Moscow Interbank Currency Exchange)

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French Financial Markets : High level of protection

AMF enforcement powers increased

Short selling under scrutiny



Regulation of Russian Financial Market

Powers of FSFR

Initiation of laws

Adoption of regulatory acts

Monitoring and supervision

Sanctions

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Modernisation of French Corporate Law :

No obligation to translate in French and to register Foreigncompanies’ by-laws

Modernized regime of preferred shares

Buy-back programs ; Liquidity agreements ; Redeemable bonds

Transparency on major holdings



Evolution of Russian Corporate Law

On-going modernization

Project on revision of Russian Civil Code

Restriction on the use of insider information

Liberalization of anti-monopoly regulations on financial markets

Enhancement of transparency obligation

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2. Tax innovations2. Tax innovations

11Company headquarters, special taxes onfinancial markets, listed REIT…

Company headquarters, special taxes onfinancial markets, listed REIT…

Extension of the special tax regime for company headquarters tofinancial services groups

Elimination of the contribution des institutions financières (special taxon financial institutions) and suppression of the stock-market tax fornon-resident investors

Reforms of the tax regime of listed real-estate companies and of thelevy on non-resident capital gains on immovable properties

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New impatriate tax regimeNew impatriate tax regime

Main feature of France impatriate tax regime :

- strict conditions to be fulfilled

- limited income tax exemption

New regime applicable from January 1st 2008 much more attractive :

- scope extended to new categories of impatriates

- income tax exemption boosted with a 50 % tax break on foreignsourced passive income

- wealth tax exemption introduced

France impatriates tax regime now one of the most competitive inEurope

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Russian taxation issuesRussian taxation issues

Low duties on issue of securities

• State duties of issue of securities by Russian issuer – 0,2% of securities nominalvalue, but capped at RUB 200,000 (around EUR 4,800)

• Authorisation for placement of securities on foreign markets – RUB 20,000

Taxation of non-Russian source income

• Income received by a Russian company from foreign sources must be fully declaredas taxable income in Russia. Special rules of the determination of the tax base forsecurities, futures, pension funds…

• Tax paid abroad can be offset when paying tax in Russia

• Offset is available upon presentation by the taxpayer of the certificate issued by aforeign entity which whithheld tax or by foreign tax athorities if tax was paid by thetaxpayer itself

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Dividends paid to Pension FundsDividends paid to Pension Funds

Conseil d’Etat, 13 February 2009, Stichting Unilever PensioenfondPensioenfonds Progress case : the French administrative supreme courtfound that the principle of free movement of capital bars France from levyinga withholding tax on dividends paid to Dutch pension funds that would beexempt if they were established in France

New provisions introduced in FTC as of January 1, 2010 :• Dividends paid to EU not-for-profit pension funds (and those established in Norway and Iceland) are now subject to

a withholding tax at the rate of 15%, similar to the tax that is now applicable to their French equivalents

• The 15% rate assumes that the foreign entity would be entitled to the same rate if it had its seat in France

• Administrative guidelines of January 15, 2010 allow pension funds to claim back the refund of WHT paid fromJanuary 1st, 2006

Reduction of withholding tax in application of Russian-French Double Taxtreaty of November 26th 1996 :

• The 15% rate can be reduced to 5% if investment not less than EUR 76,225 (FFr 500,000) and if the recipient issubject to profit tax in Russia but enjoys the parent subsidiary favorable tax regime; or to10% if only one of theabove conditions is met

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Dividends paid to investment fundsDividends paid to investment funds

European Commission, 18 march 2010 : reasoned opinion send torequire that France change its tax rules which discriminate againstforeign pension and investment funds and are therfore considered toinfringe the free movement of capital, as set out in the EU Treaty.

Administrative court of Montreuil, 3 december 2010 : does theprinciple of movement of capital also bars France from applying awithholding tax on dividends paid to non-resident investment funds,whether based in EU on non-EU countries, that would be exempt ifthey were established in France ? Case referred to the Frenchsupreme court. Preeliminary ruling expected by the end of the 2011Q1.

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Taxation of dividends in RussiaTaxation of dividends in Russia

General regime• Dividends received by a Russian company from a foreign legal entity are taxed at a flat rate of 9%.

• Offset of tax withheld in France

Parent subsidiary regime :• the recipient of dividends owns at least 50% of the payer of dividends’ capital, or owns depository

receipts entitling it to receive at least 50% of the amount of paid dividends;

• the share or depository receipts have been owned for at least 365 days on the day dividends aredeclared;

• the value of the investment is at least RUR 500,000,000 (approx. EUR 12 million). This condition iseliminated as of January 1st 2011.

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Contact detailsContact details

Maxim BoulbaMaxim Boulba –– Partner, Corporate department, CMS, RussiaPartner, Corporate department, CMS, Russia

DDial: +7 495 786 40 23

Email: [email protected]

Stanislav TourbanovStanislav Tourbanov –– Partner, Tax department, CMS, RussiaPartner, Tax department, CMS, Russia

DDial: +7 495 786 30 74


Stephane AustryStephane Austry –– Partner, Tax department, CMS Bureau Francis LefebvrePartner, Tax department, CMS Bureau Francis Lefebvre

DDial: +33.1.47.38.38.59


Bruno ZabalaBruno Zabala –– Of counsel, Banking & Finance, CMS Bureau Francis LefebvreOf counsel, Banking & Finance, CMS Bureau Francis Lefebvre

DDial: +33.1.47.38. 43.93


Legal and Tax Innovations on French Financial Markets for ... · foreign pension and investment...

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