2014 Registration Document and Annual Financial Report - page 261

Financial Statemements
Consolidated Financial Statements and Notes
Note 40.1 CIWLT tax audit
Following tax audits covering the year 2003 of the French branch of
Compagnie Internationale desWagons Lits et duTourisme (CIWLT),
a Belgian company that is 99.78%-owned by Accor SA, the French
tax authorities concluded that CIWLT’s seat of management was
in France, not Belgium.
The authorities therefore added CIWLT’s profit to the profit taxable in
France. CIWLT contested this reassessment before the competent
French courts.
The tax and related penalties totaling €17.5 million were paid in
July 2011 and late interest of €2.7 million was paid in August 2011.
Receivables for the same amounts were recorded in the consolidated
statement of financial position at December 31, 2011, offset in full
by provisions. The Versailles Administrative Court of Appeal found
against CIWLT in a ruling handed down on May 21, 2013 and in
August 2013 CIWLT filed a summary motion to institute proceedings
before the French Supreme Court of Appeal (Conseil d’Etat). The
motion was accepted and the appeal is currently being heard.
Note 40.2 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 between Accor 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. The French State’s
appeal was rejected on May 20, 2008, thereby confirming Accor’s
right to the refund decided by the Versailles Administrative Court.
As the State had not yet exhausted all avenues of appeal, a liability
was recognized for the amounts received and the financial impact
of the rulings by the Versailles 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.
In its ruling handed down on December 10, 2012, the French
Supreme Court of Appeal considered that the dividend tax credit
and precompte withholding tax systems had been shown to be
incompatible. However, the Court 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. Accordingly, the Court
found that Accor was entitled to only approximately €6.3 million of
the €156 million in principal 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 was credited to a reserve account.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.
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 Court on the same grounds, to obtain
a refund of the €187 million in ‘’precompte’’ dividend withholding
tax paid in the period 2002 to 2004. In a ruling handed down on
May 27, 2014, the Cergy-Pontoise Court applied the restrictive
principles governing the calculation of refunds described by the
French Supreme Court of Appeal (
Conseil d’État
) in a decision dated
December 10, 2012. In line with these principles, the Court found
that Accor was entitled to a refund of €7.1 million in respect of the
“précompte” dividend withholding tax for the years 2002, 2003
and 2004 together with interest of €3.3 million.
These amounts were recorded in the statement of financial position
at December 31, 2014.They had no impact on the income statement
as Accor appealed the decision before theVersailles Administrative
Court of Appeal on July 23, 2014 and the ruling is therefore not final.
Note 40.3 Tax audit at Accor SA
A tax audit is currently in progress at Accor SA. On December 26, 2013,
the tax authorities notified the Company of proposed adjustments
to its 2010 and 2011 accounts.The proposal was timed to interrupt
the statute of limitations that was due to expire for claims by the
tax authorities on December 31, 2013 and December 31,2014.The
tax authorities have not yet provided any indication of the financial
consequences of the proposed adjustments for the tax group of
which Accor SA is the filing entity, but the total risk including late
interest is estimated at €29.5 million.
Registration Document 2014
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