As of now, the French tax authorities have not expressed any formal view as it relates to Amount B. It’s unlikely they will express any opinion until the dust has settled, and the various open-ended items have been dealt with, and finalized by the OECD.
Of particular concern with amount B, is the situation where channel profit may be quite large (think luxury goods, and pharmaceutical products as 2 examples – where operating margins globally may be consistently in the high double digits). In these instances, subsidiary jurisdictions may want to keep a flexible environment, which will ultimately allow them to challenge distributor returns more easily on a case-by-case basis (New Zealand as an example has already said it will not adopt Amount B).
On the other hand, jurisdictions which are known to be predominantly IP-heavy, housing a large proportion of multinational parent companies (the US as an example is generally in favour of Amount B), the knowledge that the distribution returns may be more or less “fixed upfront”, with the hope to avoid lengthy challenges in the context of tax audits over those distribution margins could be quite comforting.
Given that France has a significant population of foreign-owned subsidiaries as well as IP-heavy French-headquartered companies, it is not obvious where the French tax authorities may ultimately side. In any event, French-based parent companies should do their homework now to assess the potential impact of Amount B as Amount B isn’t likely to disappear.
