WORLD TRADE WT/DS131/1
G/SCM/D25/1
ORGANIZATION G/L/241
11May1998
(98-1830)
Original: English
FRANCE -CERTAIN INCOME TAX MEASURES
CONSTITUTING SUBSIDIES
Request forConsultations bytheUnited States
Thefollowing communication, dated 5May1998, fromthePermanent Mission oftheUnited States
tothePermanent Mission ofFrance andtotheDispute Settlement Body, iscirculated inaccordance
withArticle 4.4oftheDSU.
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Myauthorities haveinstructed metorequest consultations withtheGovernment ofFrance
pursuant toArticles 1and4oftheUnderstanding onRules andProcedures Governing theSettlement
ofDisputes, Article 4.1oftheAgreement onSubsidies andCountervailing Measures (SCM Agreement),
andArticle 30oftheSCM Agreement (totheextent thatitincorporates byreference Article XXIII:1
oftheGeneralAgreementonTariffsandTrade1994),regardingprohibitedsubsidiesprovidedbyFrance.
Based onunofficial English translations oftherelevant legislation anddescriptions insecondary sources,
itistheunderstanding oftheUnited States that,under French income taxlaw,aFrench company may
deduct, temporarily, certain start-up expenses ofitsforeign operations through ataxdeductible reserve
account. Among theeligibility requirements forsuchanaccount arethattheFrench company must
haveestablished inaforeign country abranch orsubsidiary thatispartially owned bytheFrench parent;
andthatthebranch orsubsidiary mustderive more than50percentofitsturnover from thesaleof
products manufactured bytheFrench parent. Inaddition, itistheunderstanding oftheUnited States
thataFrench company alsomayestablish aspecial reserve equal to10percentofitsreceivable position
atyearendformedium-term credit risksinconnection withexport sales. TheUnited States believes
thattherelevant citations withrespect tothese measures include, butarenotlimited to,Article 39
octiers DItoIIIoftheFrench TaxCode andArticle 4bisandArticle 4terofAnnex IVoftheFrench
TaxCode.
TheUnited States considers thateachofthesemeasures appears toconstitute anexport subsidy,
andthatthededuction forstart-up expenses mayconstitute animport substitution subsidy. Assuch,
thesepracticesappeartobeinconsistentwiththeobligationsoftheGovernmentofFranceunderArticle3
oftheSCM Agreement.
Welookforward toreceiving yourreply tothisrequest andtofixing amutually convenient
dateforconsultations.
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