As from 2009, some specific categories of French enterprises (or French permanent establishments of foreign companies) are entitled to offset against their domestic tax result losses incurred in eligible branches and subsidiaries located abroad, notably in Russia. The tax losses offset against French profits are later reintegrated in France as soon as the foreign entity books taxable profits and in the amount of the profits.
In any case, the foreign losses must be reintegrated not later than 5 years after their deduction in France. This new mechanism commented by the French tax authorities1 aims to aid enterprises facing difficulties with their investments abroad.
Indeed, it provides for a temporary “doubledip”, as the Russian tax losses offset in France remain fully deductible locally. In the context of the present international financial crisis, this incentive therefore represents a positive measure to sustain the activity of French investors in Russia.
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