QPFC and the Offset of Foreign Tax Credits (Raymond Case)
Following the annulment of the decision and the referral of the Raymond case to the Lyon Administrative Court of Appeal, the court issued its ruling on the matter on February 6.
As a reminder, the Council of State had ruled that the fixed-rate share of expenses and charges paid on dividends under the parent-subsidiary regime could constitute a tax against which foreign tax credits may be offset "where it is established that the amount of expenses actually incurred for the acquisition or retention of investment income is less than the fixed-rate share" (Council of State, 9th and 10th Chambers, Apr. 7, 2023, No. 462709, Cited in the tables).
The Administrative Court of Appeal held that the company failed to justify the amount of the expenses by arguing "that it operates as a holding company and that the expenses incurred in managing its equity investments are nil." The Court further noted that "it did not provide sufficient justification in this regard by merely submitting a statement from its chief financial officer."
Beyond the difficulty of proving the existence of expenses that do not exist, the ruling raises questions about which party bears the burden of proof. Indeed, Raymond had been subject to a reassessment, and in such cases, the burden of proof generally rests withadministration not the taxpayer. Should the proof of these expenses then be considered an exception to this principle?
This ruling is cited in the firm’s article: “The QPFC Claim: Where Do We Stand Today?”