deducted from the results of the period in which they
were incurred; the same rule applies to the cost of
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
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.
Almost total tax exemption
for capital gains on the sale of
shareholdings held for at least
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.
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...)
This depreciation concerns tangible and, under certain
conditions, intangible assets such as patents or trademarks,
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:
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
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.
Almost total tax exemption
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
having a cost of at least €1 M.
The company is
also required to hold the securities in question for
least one year.
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
JUNE 2014 EDITION
VERY FAVORABLE CORPORATE TAX