An entity may record provisions in order to face the loss of sums the debtor of which lives in a country in which foreign currencies transfers abroad are controlled, insofar as it can prove that it has been prevented from repatriating in France at the closing of the tax year whole or part of these sums and that the company did not make the management decision either to spend or invest them there at the same time, or to perform an operation allowing to have indirectly the disposal of these sums in a convertible currency before the opening of the following tax year. These provisions must be related to the income of this tax year or the following tax years during which this repatriation, this expense, investment or income aimed at by this operation will have been performed or obtained.
In the present case, the entity the main activity of which was the manufacture and distribution of perfumes and cosmetics had granted by way of an agreement, operating licences of some of its products to a Malagasy and a Moroccan company which had in return to pay royalties calculated in percentage of their turnovers. Following the blocking measures of cash transfers abroad taken by the authorities of these countries, the company had recorded provisions in order to face the loss of its receivables. By refusing the deduction of these provisions arguing that the company, as it had not been able to obtain the transfer of its cash in France, could not however prove that it had not been able to use these sums there, the Administrative Court of Appeal of Nantes applied inaccurately article 39-1-5 of the French General Tax Code (CE, December 6, 1996, no 149923, 8e and 9e s.s., Societe L'Or‚al; RJF I/97, no.9).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be brought about your specific circumstances.
For additional information contact Claire Acard on 33/(1)/55 61 10 10, Lionel Benant on 33/220.127.116.11, Joel Fischer on 33/18.104.22.168, or Laurent Borey on 33/(1) 55 61 10 10 or enter text search: "ARCHIBALD ANDERSEN Profile".
The members of ARCHIBALD ANDERSEN Association d'Avocats (S.G. Archibald and Arthur Andersen International) are registered with the Hauts-de-Seine Bar and the Lyon Bar.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The new provisions on accounting and financial reporting came into force on 1 January 2013 and replace the former corresponding general provisions, as well as the specific rules of corporation law.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).