Paris Olympics and the Tax Game

As we gear up for the Paris 2024 Olympics and Paralympics, which kicked off on July 26, 2024, there's a lot to consider, especially if you're supporting non-resident organizations or athletes involved in the Games. Some of the highest-paid U.S. athletes participating include basketball superstar LeBron James, tennis legend Serena Williams, soccer sensation Alex Morgan, and gymnast Simone Biles, who has qualified for the gymnastics final. Additionally, several well-known U.S. companies, such as Nike, Coca-Cola, and Visa, are actively participating in the Paris Olympics. But don't worry—we're here to make it as simple as possible. So, grab your seats, and let's dive into the key tax aspects you need to know. 

The Olympic Tax Landscape

First things first: the French tax system is a bit like a French baguette—complex, layered, but incredibly well-structured. This guide focuses on four main tax areas you'll encounter: 

• Corporate Tax (CT) 

• Local Taxes 

• Personal Income Tax (PIT) 

• Value-Added Tax (VAT) 

Corporate Tax: The Big Cheese 🧀

For corporate tax, it's essential to determine if your organization has a "permanent establishment" in France. A permanent establishment could mean you're running a business from an office, a branch, or even through representatives in France. If you qualify, you'll be subject to French corporate tax, which, as of 2024, stands at 25%. 

And we can’t forget the local taxes; they are not just a side dish. If your entity's operations in France qualify as a permanent establishment, you'll also have to deal with local taxes like the Territorial Economic Contribution (TEC) and property taxes. The TEC is a combination of the company property tax (CPT) and the business value-added tax (CVAE). The CVAE rate has been gradually reduced and might disappear by 2027. Talk about a tax Houdini!  

Personal Income Tax: Bonjour, Salary!  

For individuals, the French tax system considers you a resident if you meet any of these criteria:

• Your home is in France. 

• Your main business activity is in France. 

• Your center of economic interests is in France. 

Non-residents are only taxed on their French-source income. The latest tax rates for 2023 are from 11% to 45%. Pro Tip: French fiscal years are the same as calendar years, so make sure to file your returns by May/June of the following year. 

Special Considerations for Sportspeople participating in the Games need to be looked at. The income they earn from performances in France is subject to a withholding tax at a rate of 15% (or 75% for non-cooperative states or territories). This withholding tax is deducted by the payer of the remuneration. However, additional tax may be payable when the sportsperson files an annual tax return. 

If there's an international tax treaty between France and the sportsperson's country of residence, the treaty rules will apply to allocate the right to tax and eliminate double taxation. For residents of states without such a treaty, double taxation on income received from 2023 to 2025 may be eliminated under certain conditions by applying for a rebate by December 31 of the second year following the tax collection year. This includes those holding an accreditation card for the Paris 2024 Olympic and Paralympic Games. 

National Law and Bilateral Tax Treaties

Taxation at the 2024 Paris Olympics and Paralympics is a juggling act between French national tax law and bilateral tax treaties. For both personal and corporate income tax, the usual rules apply. If it's not in the national law, it can't be taxed—simple as that. Most countries, including France, have broad rules for taxing non-residents. France, in particular, wants a piece of almost every payment leaving the country. Why so broad? Two reasons:  

France wants to rake in tax revenue from the source country and ensure non-residents don’t dodge taxes altogether. They stick closely to the OECD Model Tax Convention in their treaties, which lays out the rules for different types of income. Mainly  

• Article 7 is for companies and freelancers where Profits are taxed at home, unless there's a permanent establishment in the source country; then, the source country gets to tax those profits. 

• Article 15 focuses on employees, where employment income is taxed at home unless the work is done in the source country. But if the employee works there for up to six months, home country taxes apply. 

• In the case of royalties, which are always taxed in the home country and article 12 needs to be referred.  

• Article 17 covers sportspersons and entertainers, performances are taxed where they happen, even if the payment goes to another party like a team or company. 

VAT: The French Connection 💡

VAT in France works similarly to other EU countries but with its unique twists. The standard rate is 20%, but there are reduced rates of 10%, 5.5%, and even a super-reduced rate of 2.1% for specific items. VAT is typically neutral for businesses because you can deduct the VAT paid on purchases from the VAT collected on sales. 

VAT Refunds: Oui, Please! 🇫🇷. If you're a non-resident organization and have incurred VAT in France, you might be eligible for a refund. The procedures vary depending on whether you're based inside or outside the EU. For non-EU organizations, use the "13th Directive" procedure. And for EU organizations, use the "8th Directive" procedure. Each procedure has its own set of requirements, so it's crucial to follow the steps carefully to ensure you get your refund. 

How to Operate in France

Now, let's talk about how you and your clients can operate in France without losing your sanity. 

Scenario A: Direct Tax Liability and VAT Registration 

If your operations qualify as a permanent establishment, you must register for corporate tax and VAT. This includes filing returns and paying any due taxes. The corporate tax rate is 25%, and local taxes like TEC and property taxes will also apply.