France: Pillar Two - Overview of the Reporting Obligations for Constituent Entities Established in France

Decree No. 2024-1126 of December 4, 2024, detailing the reporting obligations under Pillar Two, was published in the Official Gazette on December 5, 2024, and came into effect on December 6, 2024.

It elaborates on (i) the reporting obligations for groups concerned by Pillar Two, (ii) the content of information exchange between states or territories, and (iii) the content of the complementary tax liquidation statement.

At the end of January 2025, the tax authorities published the new version of the tax return form reflecting these new obligations. However, the French GloBE return model is not yet available. It will be closely inspired by the model recently published by the OECD (Tax Challenges Arising from the Digitalisation of the Economy – GloBE Information Return (January 2025) | OECD). The purpose of this note is to provide a didactic presentation of these obligations, particularly aimed at the many "small groups" subject to Pillar 2 regulations which are still at the beginning of their project and the French subsidiaries of foreign groups subject to this regulation, which will also be called upon.

1. Additional Information to be Included in the Tax return (Frame II of the New Form No. 2065-INT-SD)

In application of Article 223 WW, I of the FTC, each constituent entity located in France must specify in its return :

• its membership in a group of multinational or national enterprises ("large national groups") within the scope of the Pillar 2 regulation ;
• the identity of the group's ultimate parent entity and the entity designated to file the GloBE information return ;
• the state or territory in which they are located.
   

The decree specifies that the constituent entity must also indicate in its return whether it is submitting the complementary tax liquidation statement or, if applicable, the identity of the designated constituent entity to submit it. The tax authorities recently published Form 2065-INT entitled "Notification of Membership in the Scope of International Reporting Obligations," which must be attached to tax returns starting from the 2024 fiscal year.

It consists of (i) a first part relating to companies subject to or designated for filing the CbC declaration and (ii) a second part relating to entities within the scope of Pillar Two.

This form and its instructions are available on the impots.gouv website: Formulaire n°2065-INT-SD | impots.gouv.fr.

In practice, here are some frequently asked questions and the answers we suggest. Each situation must, however, be carefully analyzed by the company, possibly with its advisors, as the regulation is often obscure and has not yet been the subject of official comments from the tax authorities at the time of writing.

From which FY onwards must this form be completed?

In the vast majority of cases, it concerns French constituent entities (subsidiaries or branches/permanent establishments of foreign companies) whose fiscal year runs from January 1 to December 31, 2024. These entities must already have been informed by the ultimate parent entity (usually, the company that publishes the group's consolidated accounts, in France or abroad) that they are subject to the Pillar Two regulations with the group.

Does this form only apply to entities subject to corporate income tax?

No. The form's guidance clearly state this. This form will be part of the 2065 tax package for entities themselves subject to corporate tax (the most common case) but also of the 2072 form (civil companies subject to Article 8 of the FTC, thus fiscally transparent) or 2031 form (for example, SNC subject to Article 8 of the FTC). Under the Pillar Two regulations, these fiscally transparent entities are "interposed entities" as defined in Article 223 VK-14° of the FTC. They may pose particular difficulties concerning the application of the regulation because they generate an income, but the tax on this income is generally not paid by them, which requires an adaptation of the rules. Therefore, these entities must be carefully identified within the scope.

I am a constituent entity but form part of a tax group incorporated in France on behalf of which the group head company pays corporate income tax on the group’s taxable income. Do I need to fill in the form?

Yes. The fact that an entity belongs to a tax consolidated group does not exempt it from producing an individual "classic" declaration. In the vast majority of cases, a fiscally integrated entity is accounting-wise assimilated to an entity that pays tax on its own income. However, the specific rules of fiscal integration may interact with the Pillar Two rules and generate particular difficulties.

Does this apply to me if I am part of a purely domestic French group, with no presence abroad?

Yes. The Pillar Two regulation also targets large national groups (the same size as multinational groups but present in a single jurisdiction). These groups are not subject to a CbC reporting obligation but do fall under Pillar Two (Art. 223 VL of the FTC), as paradoxical as it may seem.

Why does the information relating to the CbCR appear on the same form as that relating to Pillar Two?

The CbCR declaration has existed since 2016 but went relatively unnoticed until the adoption of the Pillar Two regulation. Indeed, thanks to the information contained in their qualified CbCR, most groups will be exempted from a detailed GloBE return in many jurisdictions, or even all jurisdictions, where they operate (see the practical FAQ on the GloBE return). Furthermore, for groups headquartered in France, it is very often this group head that will file both the CbCR and the GloBE information return on behalf of all the group's companies.

What is the second box on the form relating to Pillar Two for?

It allows the administration to identify entities in France that are concerned by the Pillar Two regulation. This part of the form must be carefully completed by the concerned entities, which need to know precisely (i) the declarative process adopted concerning the filing of the GloBE information return (who does what?) and (ii) whether the group to which the entity belongs expects to pay a top up tax in France, either under the IRR, the UTPR (what could be called the "worldwide" Pillar 2 tax), or the QDMTT, a national complementary tax, which allows capturing in France the tax resulting from the under-taxation of French group entities.

What are the penalties for failure to submit this form or for a form providing incorrect information?

Article 1729 F bis of the FTC, which provides for specific sanctions for the Pillar 2 regulations, states that a fine not exceeding €50,000 per declaration is applicable for all breaches of the reporting obligations provided for in Article 223 WW of the FTC, other than those relating to the failure to file or late filing of the GloBE information return and the top up tax liquidation statement. Strictly speaking, the €50,000 fine thus targets breaches related to Frame II of the new form.

2. Details on the Content of the GloBE Information Return ("GIR")

The decree of December 4, 2024, specifies that the information return must be completed in euros or in the currency used in the group's consolidated financial statements and must include the following 5 statements:

3. Simplified Transitional Declaration System

The decree provides the possibility of opting for a simplified transitional declaration system when the following two conditions are met :

• the fiscal year concerned by the option was opened no later than December 31, 2028, and closed no later than June 30, 2030 ;
• no top up tax requiring allocation between constituent entities is due by the multinational enterprise group or national group in the State or territory concerned.
   

The decree refers to the protection regime (temporary at this stage, planned for three fiscal years in principle, but which could be made permanent in the future) provided for by Article 223 VZ bis of the FTC, which offers the possibility of deeming the complementary tax due under Pillar Two null if certain tests based on data from the qualified CBCR are met (the tax return forlarge national groups).

This option allows for a very substantial reduction in the information to be provided in the 4th statement mentioned above and thus of the administrative burden related to compliance with the regulation, which all groups complain about. To benefit from this system, it is imperative to be able to justify that the CBCR is qualified according to the OECD's comments (pp. 290 and following of the consolidated comments as of December 2023), which leads groups to review in-depth and as a priority their CBCR process and to prepare their CBCR based on consolidated account data.

However, it should be noted that according to Article 46 quater-0 ZZE of Annex III to the FTC, alongside the information necessary for the application of the protection regime, specific quantified information must be mentioned for each constituent entity, which slightly tempers the expected declarative relief in view of the drafting of the law.

4. Complementary Tax Liquidation Statement

Under Article 1679 decies of the FTC, the top up tax due in France may be:

• the tax due in France under the IRR by the group head (the group's parent entity, under the Pillar Two regulation), which will most often be reduced by local complementary taxes (those called QDMTT) provided for by the local Pillar regulation to which foreign subsidiaries are subject ;
• the tax due under the UTPR by the liable French constituent entities (this is the case, for example, for direct subsidiary entities or via a French holding of a foreign parent entity established in a country that has not transposed the Pillar Two regulation) ;
• the qualified domestic minimum top-up tax (QDMTT) due by the liable French entity (this is the case, for example, of a low-taxed French subsidiary held by a German parent entity subject to Pillar Two).
   

The liquidation statement, if there is a tax to be paid, is generally produced by each liable French constituent entity, but the last paragraph of I of Article 1679 decies of the FTC allows one of the liable French constituent entities to be designated to pay the entire tax due in France, either under the UTPR or the QDMTT. It is expected that this choice will be made for fiscally integrated groups that are already organized to centralize the taxes due by member companies at the integrating company. Even if the paying entity acts only as an agent for the payment of this tax, it may be held jointly liable for sanctions or costs incurred in case of late or insufficient payment (cf. art. 53 of the Finance Law for 2025, recently adopted). It is therefore essential to properly provide for the obligations of the parties concerned in a duly formalized contract.

The decree also provides details on the information to be included in the complementary tax liquidation statement. Thus, in addition to the general information relating to the constituent entity itself or the entity designated for filing the GloBE information return, the statement must contain the following information related to the complementary tax due :

• the amount due under the IRR ;
• the amount due under the UTPR corresponding to the sum of the UTPR amounts due by each liable French entity ;
• the QDMTT due for each entity and the sum of these taxes;

The statement must be dated and signed by the paying party. Entities that are not liable for the complementary tax for a fiscal year or that have designated another group entity to pay this tax on their behalf are exempted from filing the liquidation statement.

In practice, here are some frequently asked questions and the answers we suggest. Each situation must, however, be carefully analyzed by the company, possibly with its advisors, as the regulation is often obscure and has not yet been the subject of official comments from the tax authorities at the time of writing.

What is the simplest way to draw up this declaration?

Ideally, for a given constituent entity, it is to be able to indicate in its GIR that it benefits from one of the tests based on the qualified CBCR, knowing that these tests are generally (but the regulation provides exceptions, for example, for joint ventures) assessed at the jurisdiction level, aggregating all the constituent entities located there. For this, it is necessary to opt for the simplified transitional declaration system.

Is it necessary to have a specific tool to produce this declaration?

In theory, the necessary calculations can be done in an Excel file... with all the drawbacks that this may have. "Market" tools already exist and are regularly updated and supplemented, and "in-house" tools are also being developed. Each group must choose the solution that suits it best. Such a tool can be valuable for calculation assistance, documentation, traceability, scenario simulation... But it requires a lot of work to be done upstream, and time is increasingly pressing.

What are the penalties for failure to submit this form or for providing incorrect information?  

Article 1729 F bis of the FTC provides for a fine of €100,000 in the event of failure or delay in filing the declaration or the liquidation statement. The fine can not exceed €50,000 per declaration for all other breaches of the reporting obligations set out in Article 223 WW of the FTC, such as the submission of an incomplete or erroneous GIR. This provision encourages the production of a GIR that includes, if possible, all the constituent entities of the group (centralized GIR), as allowing each constituent entity to file its own GIR could expose them to the aforementioned sanctions, which could apply multiple times within the group. However, Section II of Article 1729 F bis of the FTC provides for a cap on the lump-sum fines incurred, set at €1 million for a given fiscal year.

For more information or professional advice, please contact our member firm in France, Fidal