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Captives in France: not just yet

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The French government had promised to review the tax framework for captives to encourage their creation in France. However, in November 2021, it appeared that the measure would not be part of the 2022 Finance Bill.

The creation of a specific mechanism allowing captives to smooth their reserves over time, i.e. equalization reserves, is understood to be considered by the European Union as a “state aid mechanism”, and therefore subject to the prior approval of the European Commission.

Going forward, France might start the process by notifying Brussels of its intentions and then introduce a “stable” scheme either through a forthcoming corrective 2022 finance bill or in the 2023 bill.

In any case, it would be rather unwise to embark immediately on the creation of a captive under French law. Stay tuned but don’t hold your breath!

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