2013 Registration document and annual financial report - page 274

Registration Document 2013
Financial Statemements
Consolidated Financial Statements And Notes
In a ruling handed down onMay 21, 2013, theVersaillesAdministrative
Court of Appeal also found against CIWLT for the year 2003.
CIWLT appealed this ruling before the French Supreme Court of
Appeal (
Conseil d’État
) in August 2013. The Supreme Court ruled
that the appeal was admissible and it is currently in the pre-trial
investigation phase.
Note 39.2. Dividend withholding tax
In 2002, Accor mounted a legal challenge to its obligation to pay
“précompte” dividend withholding tax on the redistribution of
European source dividends.
Until 2004, French parent companies were entitled to a 50%
tax credit on dividends received from French subsidiaries, which
could be set off against the “précompte” dividend withholding tax.
However, no tax credit was attached to European source dividends.
Accor contested this rule, on the grounds that it breached European
Union rules.
In the dispute betweenAccor and the French State, on December 21,
2006 theVersailles Administrative Court ruled that Accor was entitled
to a refund of the “précompte” dividend withholding tax paid in the
period 1999 to 2001, in the amount of €156 million.The amount of
€156 million was refunded to Accor during the first half of 2007,
together with €36.4 million in late interest due by the French State.
However, on March 8, 2007, the French State appealed the ruling
before the Versailles Administrative Court of Appeal. The French
State’s appeal was rejected on May 20, 2008.
As the State had not yet exhausted all avenues of appeal, a liability
was recognized for the amounts received (see Note 24.3) and the
financial impact of the rulings by theVersailles Administrative Court
and Court of Appeal was not recognized in the financial statements.
On July 3, 2009, the French Supreme Court of Appeal announced
that it would postpone ruling on the French State’s appeal and on
August 4, 2009, it applied to the Court of Justice of the European
Communities (ECJ) for a preliminary ruling on this issue.
After reviewing the matter, the ECJ’s final ruling was handed
down on September 15, 2011. In this ruling, the ECJ held that the
French “précompte”/tax credit system restricts the freedom of
establishment and free movement of capital.
During 2011 and 2012, Accor and the tax authorities submitted
various briefs to the Supreme Court of Appeal and Accor produced
documentary evidence of the EU source dividends and of the tax
paid by its European subsidiaries on the distributed amount.
On November 21, 2012, the Supreme Court of Appeal met to review
the reporting judge’s conclusions. In summary, the reporting judge
considered that the dividend tax credit and “précompte” dividend
withholding tax systems had been shown to be incompatible.
However, he also considered that the amount to be refunded was
subject to strict rules which, to all intents and purposes, restricted
Accor’s right to a refund.
On December 10, 2012, the Supreme Court of Appeal handed down
a ruling closely aligned with the reporting judge’s conclusions,
according to which Accor was entitled to €6.3 million of the
€156 million already refunded. In addition to the €149.7 million to
be returned to the French State, Accor was also required to repay
the late interest received in 2007, amounting to approximately
€36.4 million, less the portion related to the retained refund of
€6.3 million. In all, €184.7 million in principal and interest was
repaid to the French State during first-half 2013.
In the 2012 financial statements, the €6.3 million “précompte”
dividend withholding tax refunded to Accor and not repayable
to the French State has been credited to a reserve account (see
Changes in Consolidated Shareholders’ Equity). The estimated
€1.4 million in late interest received on this amount was considered
as offsetting the early payment of tax, and was therefore recorded
as a tax benefit in the income statement. The total amount repaid
to the French State, representing approximately €184.7 million, led
to an increase in net debt of the same amount.
Accor has noted the Supreme Court of Appeal’s decision and intends
to continue to use the avenues available to it to defend its position
in the dispute with the French tax authorities.
On February 7, 2007, Accor filed an application originating proceedings
before the Cergy Pontoise Adminstrative Court on the same
grounds, to obtain a refund of the €187 million in “précompte”
dividend withholding tax paid in the period 2002 to 2004. A ruling
is expected during 2014 as the Court has indicated that it wants
the pre-trial investigation to be completed by February 28, 2014.
Note 39.3. Tax dispute in Italy
In October 2011, the Italian tax authorities notified several Accor and
Edenred subsidiaries of a €27.4 million tax reassessment concerning
registration duties.The reassessment is based on the requalification
as the sale of a business subject to registration duty of a number
of transactions carried out as part of the reorganization of Accor’s
Services division in Italy between 2006 and 2010.
The Accor and Edenred companies concerned wrote to the Italian
authorities on December 16, 2011 contesting the reassessments.
The reassessment notices required settlement of the tax deficiencies
within 60 days and the companies concerned therefore paid the
amounts claimed on December 16, 2011.The cost was shared equally
between Accor and Edenred pursuant to an agreement assigning
the risk and any resulting costs to the two parties on a 50/50 basis.
The companies believe that the tax reassessment is without merit
and, after consulting with their legal and tax advisors, consider
that their challenges have a reasonable chance of success. No
related impact was recorded in Accor’s 2011 consolidated income
Legal proceedings have been launched and the date of the
first-instance court hearing has been set for March 11, 2014.
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