Monday 16 September 2019

France to lure private equity with post-Brexit tax break


Paris is competing with Dublin and other European cities for City of London jobs
Paris is competing with Dublin and other European cities for City of London jobs

Erich Zann

France has stepped up efforts to lure UK-based private-equity executives into relocating to Paris after Brexit by pledging to slash the tax rate on the cut of profits managers share with their investors, to the chagrin of some local rivals.

Paris is competing with Dublin and Luxembourg to attract investment funds looking to ensure continued access to European Union clients after Britain leaves the bloc next March, but has found its tax rules are a barrier for some.

To help make relocation more attractive, France plans to cut the tax rate on 'carried interest', or their share of whatever profits private equity fund managers generate, to 30pc from 75pc. Until now, a manager needed to hold at least 1pc of their fund's assets or meet other complex rules to secure the 30pc tax rate. Under the new rule, newcomers will be taxed at the low rate no matter how much they hold in their fund. Companies already in France will miss out on the change, which is expected to take effect by the end of December.

"The special tax rate will be applicable only to foreign funds relocating in France," the finance ministry's special adviser on the matter said. "Any new fund created in France will have to stick to the pre-existing rules."

The 30pc rate is still some way above the 15pc in Ireland and roughly 11pc payable in Luxembourg, but compares well with lows of around 28pc in Germany and Britain.

Ever since the Brexit vote, French authorities have sought to attract UK-based financiers to help secure business and jobs, boost funding to local companies and better manage risks by ensuring supervision by French regulators.


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