Remerciez-le!

Remerciez @Admin pour avoir partagé cet document gratuitement, de la manière la plus simple, en partageant sur les réseaux sociaux.

[Black & Case LLP – Draft 2017/09/19] SETTLEMENT AGREEMENT BETWEEN THE UNDERSIG

[Black & Case LLP – Draft 2017/09/19] SETTLEMENT AGREEMENT BETWEEN THE UNDERSIGNED: Laurent HOUTTAN, Public Finance Administrator, General Directorate of Public Finance, on behalf of the French Tax Authorities. (hereinafter the “Authorities”) On the one hand, AND: Pincemi Holidays France, SAS, having its registered office at allée de l’Orme Rond, 77700 Bailly Romainvilliers Paris, registered with the companies' register of Meaux under number 440 740 365, represented by its CEO, Ms. Maud ZARELLA, duly empowered for the purposes hereof. (hereinafter the “Pincemi France”) AND Pincemoi France, SARL, having its registered office at allée de l’Orme Rond, 77700 Bailly Romainvilliers Paris, registered with the companies' register of Meaux under number 434 012 973, represented by its CEO, Mr. Gérard MANVUSSA, duly empowered for the purposes hereof. (hereinafter the “Pincemoi France”) (hereinafter, together, the “Companies”) On the other hand, (hereinafter, together, the “Parties”) 2 WHEREAS: The Authorities carried out an accounting audit of the Companies from January 15, 2015 to November 28, 2016 in respect of Pincemi France and from February 16, 2016 to November 28, 2016 in respect of Pincemoi France, for the period from January 1, 2013 to December 31, 2015. Further to these audits, the Authorities issued two reassessment proposals intended for each Company on December 19, 2016. By letters of February 14, 2017, the Companies expressed to the Authorities their disagreement with the proposed reassessments. The Companies then filed an appeal with a higher administrative authority, in the context of which they were able to meet Senior Tax Inspector Sarah FRECHI on May 5, 2017. Further to these meetings, the authorities indicated on May 19, 2017 that they intended to maintain the reassessments in full. During the audit procedures, the discussions between the Authorities and the Companies brought to light a discrepancy in the interpretation of the economic condition and business of the Companies. The Companies restate below their position since the beginning of the audits, which is consistent with the business plan drawn up upon their creation, as implemented since then. Both Companies have been created for the purposes of operating a vacation resort, referred to as Village aux Ours, comprising a group of properties located in Bailly-Romainvilliers and operated under the Hilton trademark. The occupants of such properties are persons who have acquired directly from Pincemi France, or from other companies of the group to which the Companies belong, i.e., the Hilton Vacation Worldwide group (hereinafter “HVW”), which has locations worldwide, weeks of occupancy in the apartments of the property (hereinafter the "Timeshare Weeks"). The business plan of this resort relies on a long-term occupancy of the properties over the total projected term of the investment, i.e., 80 years. The operation of this business has been allocated among the two Companies as follows: Pincemoi France owns the buildings and leases them, under long-term lease agreements, to Pincemi France, which is responsible for their operation. In consideration of the 80-year term of the project, the latter is, in respect of the financial years that were subject to tax audit as well as in respect of the following financial years until the financial year during which this agreement is executed, still in its start-up stage. Therefore, the expenses related to the initial set-up investments of the project at the level of each of the Companies exceeded and still exceed the sales, which explains their loss-making situation since the beginning of the project. Nevertheless, based on the latest update of the business plan, it is anticipated that the financial breakeven point of the project will be reached in 2019. Due to these lossmaking situations since their creation, the Companies have accrued tax losses as at December 31, 2015 that are allocated as follows: 3 - Pincemoi France: €16,468,904 - Pincemi France: €23,944,004. During the audit procedures, the Authorities did not accept the business model of the Companies and considered that the Companies had carried out irregular management actions and transfers of profits abroad. The position of the Authorities relies on a different interpretation of the economic condition of the Companies and on the need to amend the transfer prices used by the Companies. Based on the functional analysis presented in the reassessment proposals of December 19, 2016, the Authorities considered that the Companies were not the main operators of the site but mere service providers and that, considering their role in the HVW group, they should have obtained from the group the guarantee that they will be in a profit-making situation and that their earnings should be calculated in a standard manner. In respect of Pincemoi France, the Authorities consider that the provision of building rental services granted to Pincemi France is not sufficiently compensated for, that this compensation should have been calculated based on the cost-plus method, and that the percentage to be applied to the costs incurred by Pincemoi France should be of 5%. In respect of Pincemi France, the Authorities consider that the company is solely a retailer, acting on behalf of a main operator, i.e., the US company HVWC. The Authorities therefore consider that Pincemi France shall be, firstly, protected against the risk of losses, but also, secondly, that its profit outlook should be capped. The Authorities therefore suggest that a standard profit be calculated based on the transactional net margin method, with a profitability rate of 3%. Based on these adjustments of earnings suggested for the Companies, the Authorities indicated that the audit in respect of corporate income tax would solely result in a decrease in the tax losses carried forward, in the following amounts: Losses carried forward as at December 31, 2015 Tax-audit related adjustments Remaining losses after tax audit1 Pincemoi France 16,468,904 (10,555,954) 5,912,950 Pincemi France 23,944,004 (28,921,937) 0 Tax consolidation group 27,372,458 3,406,705 The Authorities also suggested that the added value of both Companies be increased, entailing additional tax assessments in respect of business contribution on added value 1 See Appendix 1 for details. 4 (CVAE) in the amounts, including late payment interest, of €187,991 for Pincemi France and of €23,617 for Pincemoi France. Although the Companies consider that the position of the Authorities is inconsistent with the functions effectively exercised by the Companies and with their business plan, and that in their opinion, it does not reflect the legal and economic realities of the group in France as restated above, the Companies are willing to enter into a settlement agreement with the Authorities, by accepting the reassessments proposed and their consequences on future financial years, in order to avoid litigation proceedings, subject to the reciprocal acceptance by the Authorities of a number of conditions. Firstly, in the context of the first discussions on a potential settlement between the parties, the Authorities had proposed that they would proceed as follows in respect of future adjustments: - If the taxable earnings excluding adjustments are below the standard earnings of 5% of costs for Pincemoi France and of 3% profitability for Pincemi France, the adjustments allowing to recalculate the standard earnings would be considered as subsidies paid by HVW US to each of its French Companies; - If the taxable earnings excluding adjustments exceed the standard taxable earnings, the adjustments would be considered as fees paid by the Companies to HVW US. Nevertheless, in accordance with US tax regulations, such a subsidy deemed to be paid by HVW US would not be deductible from its taxable earnings, while it would be taxable in France at the level of the Companies. Similarly, the fees received by HVW US would be taxable in the United States, therefore the implementation of such a treatment would entail a double economic taxation of part of the earnings made in France, the elimination of which could only be obtained by setting up a mutual agreement between the French tax authorities and the US tax authorities. The consequences of such a double taxation were not acceptable by the Companies as they stand, therefore the Companies suggested a different special-purpose tax treatment, the economic consequences of which are strictly identical to those suggested by the Authorities. In accordance with this treatment, the Companies would recognize on a yearly basis specific tax adjustments for establishing their taxable earnings, in order to determine standard taxable earnings calculated in accordance with the methods suggested by the Authorities in their reassessment proposals. In respect of Pincemoi France, the amount of the adjustments would be equal, for each financial year, to the difference between the standard earnings determined by applying the cost +5% method to the operating expenses reported by Pincemoi France (GF box of French tax form No. 2052) and its net sales (FL box of French tax form No. 2052). In respect of Pincemi France, the amount of the adjustments would be equal, for each financial year, to the difference between the standard operating income determined by applying a profitability rate of 3% of the net sales reported by Pincemi France (FL box of French tax form No. 2052) and the operating income reported by Pincemi France (GG box of French tax form No. uploads/Finance/ apprendre-l-x27-anglais-juridique.pdf