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deducted from the results of the period in which they

were incurred; the same rule applies to the cost of

software design

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unless the purpose of the company is the lucrative

exploitation of such property, the deduction of so-called

“sumptuary” expenses is restricted. These include

the acquisition or use of certain passenger vehicles

or expenses of any kind resulting from the purchase,

lease or other transaction made in order to obtain

the provision of yachts or pleasure boats, sailing or

motor-driven, and their maintenance costs

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as a general rule, fees of any nature between companies

of the same group are deductible if the transactions

invoiced are in line with market prices and actually take

place. Amounts invoiced within an international group

are subject to international rules on transfer pricing.

Tax credits corresponding to withholding tax potentially

levied abroad during the distribution of dividends to

the parent company based in Saint-Martin are neither

deductible nor returnable.

4.

Almost total tax exemption

for capital gains on the sale of

shareholdings held for at least

two years

Capital gains on the sale of shareholdings held for at

least two years are totally exempt except for a 5% share

for fees and expenses (gains are therefore taxed only

up to 5% of their amount).

This exemption applies regardless of where the subsi-

diaries’ headquarters are based.

5.

Generous depreciation rules

Fixed assets whose expected useful life for the business

is limited in time due to various criteria, physical (wear...),

technical (obsolescence...) or legal (protection period...)

are depreciated.

This depreciation concerns tangible and, under certain

conditions, intangible assets such as patents or trademarks,

for example.

Fixed assets, potentially broken down into “components”

within the meaning of French accounting regulations,

are in principle depreciated over the actual duration of

their use. Companies can, in some cases, rely on the

useful life generally accepted in practice (commercial

buildings: 2-5%; buildings for office use: 4%; equipment:

10%... ).

Two depreciation methods are allowed for tax purposes:

the common law system, in other words, the linear

system (fixed annuities) and the declining balance system

reserved for certain categories of goods (decreasing

annuities).

The latter system, which is highly favorable, is characterized

by the application of a “constant“ (straight-line depreciation

rate multiplied by a coefficient dependent on the useful

life of the property) first to the original value then the

residual book value of the property.

The acceleration coefficient is set at 1.25 (depreciation

period of 3 or 4 years), 1.75 (period of 5 or 6 years) or

2.25 (period over 6 years).

Finally, in practice, taxable income is determined on the

basis of the accounting income of the company after

positive or negative non-accounting adjustments made

to take into account specific tax rules.

3.

Almost total tax exemption

for dividends

Dividends paid to companies established in Saint-Martin,

regardless of the location of the subsidiaries’ headquar-

ters (Saint-Martin, France, USA, other countries...) benefit

from full exemption, subject to a “share for fees and

expenses” equal to 5% (“parent-subsidiary” scheme).

In other words, dividends are taxed at only 5% of their

value, not including foreign tax credits.

This share however may not exceed, for each tax period,

the total amount of fees and expenses of any kind incurred

by the participating company during the same period.

To benefit from this scheme, the company must hold a

stake in the subsidiary representing at least 5% of capital

or

having a cost of at least €1 M.

The company is

also required to hold the securities in question for

at

least one year.

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IMPORTANT

Tax legislation in Saint-Martin does not provide any

mechanism to limit the deduction of financial expenses in

the case of under-capitalization or in the case of acquisition

of shareholdings.

13

MARCH 2015 EDITION

VERY FAVORABLE CORPORATE TAX