French General Tax Code
In forceProperty and casualty insurance companies of all kinds must, when they apply to the taxable income for a financial year the surplus of provisions set aside to meet the settlement of claims arising during a previous financial year, pay a tax representing the interest corresponding to the cash flow advantage thus obtained.
The tax is based on the amount of corporation tax that would have been payable in the year in which the provisions were set aside in the absence of a surplus. For the purposes of calculating this tax, the reinstated surplus provisions are reduced by an excess equal to 3% of the amount of each surplus and the claims payments made during the year from the corresponding provision, and by the additional allocations made at the end of the same year to cover the increase in the estimated cost of claims incurred in previous years. Each excess provision, after application of the deductible, and each additional allocation are attached to the financial year in respect of which the initial provision was established. The tax is calculated at the rate of 0.40% per month elapsed since the provision was set up, disregarding the number of years corresponding to the number of financial years in respect of which no corporation tax was due.
However, where the amount of provisions set aside to meet claims for a given financial year has been increased at the close of a subsequent financial year, the sums reintegrated are deemed to come first from the most recent allocation made.
The tax is declared and settled:
1° For those liable for value added tax, on the schedule to the declaration mentioned in 1 of article 287 filed in respect of the month of April or the second quarter of the year during which the tax provided for in this article is due or, for taxpayers whose financial year does not coincide with the calendar year, in respect of the fourth month or the second quarter following the end of the financial year ;
2° For those liable for value added tax subject to the simplified taxation scheme provided for in article 302 septies A, on the annual return referred to in 3 of article 287 filed during the year in which the tax is due ;
3° For persons not liable for value added tax, on the annex to the declaration provided for in 1 of the same Article 287 filed with the service responsible for collection for which their registered office or main establishment is responsible no later than 25 June of the year during which the tax provided for in this Article is due.
The tax is paid when the declaration is filed. It is collected as for turnover taxes and under the same guarantees and penalties.
The provisions of this article do not apply to provisions constituted in respect of reinsurance transactions by undertakings engaged in non-life reinsurance.
The tax is not deductible from the basis of assessment for corporation tax.
