The Issuer's debt securities (Obligations Foncières and registered covered bonds) increased by an amount of
€684 million between 31 December 2014 and 9 June 2015.
TAXATION
The statements herein regarding taxation are based on the laws of the European Union, France, the Grand Duchy of Luxembourg and the United States (as the case may be) as of the date of this Programme and are subject to any changes in law. The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to purchase, own or dispose of the Obligations Foncières.
Each prospective holder or beneficial owner of Obligations Foncières should consult its tax advisor as to the European Union, French, Luxembourg and the United States (as the case may be) tax consequences of any investment in or ownership and disposition of the Obligations Foncières.
EU Taxation
Under Council Directive 2003/48/EC on the taxation of savings income (the “Savings Directive”), Member States are required, subject to a number of conditions being met, to provide to the tax authorities of other Member States details of certain payments of interest or similar income paid or secured by a person established in a Member State to or for the benefit of an individual resident in another Member State or certain limited types of entities established in another Member State.
For a transitional period, Austria is required (unless during that period it elects otherwise) to operate a withholding system in relation to such payments. The end of the transitional period is dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries. A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
On 24 March 2014, the Council of the European Union adopted a Council Directive (the “Amending Directive”) amending and broadening the scope of the requirements described above. The Amending Directive requires Member States to apply these new requirements from 1 January 2017, and if they were to take effect the changes would expand the range of payments covered by the Savings Directive, in particular to include additional types of income payable on securities. They would also expand the circumstances in which payments that indirectly benefit an individual resident in a Member State must be reported or subject to withholding. This approach would apply to payments made to, or secured for, persons, entities or legal arrangements (including trusts) where certain conditions are satisfied, and may in some cases apply where the person, entity or arrangement is established or effectively managed outside of the European Union.
However, the European Commission has proposed the repeal of the Savings Directive from 1 January 2017 in the case of Austria and from 1 January 2016 in the case of all other Member States (subject to on-going requirements to fulfil administrative obligations such as the reporting and exchange of information relating to, and accounting for withholding taxes on, payments made before those dates). This is to prevent overlap between the Savings Directive and a new automatic exchange of information regime to be implemented under Council Directive 2011/16/EU on Administrative Cooperation in the field of Taxation (as amended by Council Directive 2014/107/EU). The proposal also provides that, if it proceeds, Member States will not be required to apply the new requirements of the Amending Directive.
France - Taxation
Prospective holders or beneficial owners of Obligations Foncières should consult their tax advisors as to the tax consequences of any investment in or ownership and disposition of the Obligations Foncières.
Implementation of the Savings Directive in France
The Savings Directive has been implemented into French law under Article 242 ter of the French Code général des impôts and Articles 49 I ter to 49 I sexies of the Schedule III to the French Code général des impôts, which impose on paying agents based in France an obligation to report to the French tax authorities certain information with respect to interest payments made to beneficial owners domiciled in another Member State, including, among
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other things, the identity and address of the beneficial owner and a detailed list of the different categories of interest paid to that beneficial owner.
French withholding tax
The following is a summary of certain tax considerations that may be relevant to holders of Obligations Foncières who do not concurrently hold shares of the Issuer.
Obligations Foncières which are not assimilated to (assimilables for the purpose of French law) Obligations Foncières issued before 1 March 2010
Payments of interest and other revenues made by the Issuer with respect to Obligations Foncières issued on or after 1 March 2010 (other than Obligations Foncières (described below) which are assimilated to (assimilables for the purpose of French law), and form a single series with, Obligations Foncières issued prior to 1 March 2010 benefitting from the exemption from withholding tax of Article 131 quater of the French Code général des impôts) will not be subject to the withholding tax set out under Article 125 A III of the French Code général des impôts unless such payments are made outside France in a non-cooperative State or territory (Etat ou territoire non coopératif) within the meaning of Article 238-0 A of the French Code général des impôts (a “Non-Cooperative State”). If such payments under the Obligations Foncières are made in a Non-Cooperative State, a 75%
withholding tax will be applicable (subject to certain exceptions and to the more favourable provisions of an applicable double tax treaty) by virtue of Article 125 A III of the French Code général des impôts.
Furthermore, according to Article 238 A of the French Code général des impôts, interest and other revenues on such Obligations Foncières are not deductible from the Issuer's taxable income if they are paid or accrued to persons domiciled or established in a Non-Cooperative State or paid in such a Non-Cooperative State (the
“Deductibility Exclusion”). Under certain conditions, any such non-deductible interest and other revenues may be recharacterised as constructive dividends pursuant to Articles 109 et seq. of the French Code général des impôts, in which case such non-deductible interest and other revenues may be subject to the withholding tax set out under Article 119 bis of the French Code général des impôts, at a rate of 30% or 75% (subject to the more favourable provisions of an applicable double tax treaty).
Notwithstanding the foregoing, neither the 75% withholding tax set out under Article 125 A III of the French Code général des impôts nor to the extent the relevant interest or other revenues relate to genuine transactions and are not in an abnormal or exaggerated amount the Deductibility Exclusion will apply in respect of a particular issue of Obligations Foncières if the Issuer can prove that the principal purpose and effect of such issue of Obligations Foncières was not that of allowing the payments of interest or other revenues to be made in a Non-Cooperative State (the "Exception"). Pursuant to the Bulletin Officiel des Finances Publiques-Impôts BOI-INT-DG-20-50-20140211, n°550 and 990, BOI-RPPM-RCM-30-10-20-40-BOI-INT-DG-20-50-20140211, n°70 and 80, BOI-IR-DOMIC-10-20-20-60-20150320, n°10 and BOI-ANNX-000364-20120912, n°20, an issue of Obligations Foncières will benefit from the Exception without the Issuer having to provide any proof of the purpose and effect of such issue of Obligations Foncières, if such Obligations Foncières are:
(i) offered by means of a public offer within the meaning of Article L.411-1 of the French Code monétaire et financier or pursuant to an equivalent offer in a State other than a Non-cooperative State. For this purpose, an “equivalent offer” means any offer requiring the registration or submission of an offer document by or with a foreign securities market authority; or
(ii) admitted to trading on a regulated market or on a French or foreign multilateral securities trading system provided that such market or system is not located in a Non-Cooperative State, and the operation of such market is carried out by a market operator or an investment services provider, or by such other similar foreign entity, provided further that such market operator, investment services provider or entity is not located in a Non-Cooperative State; or
(iii) admitted, at the time of their issue, to the clearing operations of a central depositary or of a securities clearing and delivery and payments systems operator within the meaning of Article L.561-2 of the French Code monétaire et financier, or of one or more similar foreign depositaries or operators provided that such depositary or operator is not located in a Non-Cooperative State.
Obligations Foncières which are assimilated to (assimilables for the purpose of French law) Obligations Foncières issued before 1 March 2010
Payments of interest and other revenues with respect to Obligations Foncières issued on or after 1 March 2010 and which are assimilated to (assimilables for the purpose of French law), and form a single series with Obligations Foncières issued before 1 March 2010 with the benefit of Article 131 quater of the French Code général des impôts will continue to be exempt from the withholding tax set out under Article 125 A III of the French Code général des impôts. Payments made outside France in a Non-Cooperative State will hence be exempt from such withholding tax.
Obligations Foncières issued before 1 March 2010, whether denominated in Euro or in any other currency, and constituting obligations under French law, or titres de créances négociables within the meaning of the Bulletin Officiel des Finances Publiques Impôts BOI-RPPM-RCM-30-10-30-30-20140211, or other debt securities issued under French or foreign law and considered by the French tax authorities as falling into similar categories, are deemed to be issued outside the Republic of France for the purpose of Article 131 quater of the French Code général des impôts, in accordance with the aforementioned Bulletin Officiel des Finances Publiques Impôts.
In addition, interest and other revenues paid by the Issuer on Obligations Foncières issued on or after 1 March 2010 and which are to be assimilated to (assimilables for the purpose of French law), and form a single series with Obligations Foncières issued before 1 March 2010 will not be subject to the Deductibility Exclusion and hence will not be subject to the withholding tax set out in Article 119 bis of the French Code général des impôts solely on account of their being paid in a Non-Cooperative State or accrued or paid to persons established or domiciled in a Non-Cooperative State.
Payments made to individuals fiscally domiciled in France
Where the paying agent (établissement payeur) is established in France, pursuant to Article 125 A of the French Code général des impôts subject to certain limited exceptions, interest and assimilated revenues received by individuals who are fiscally domiciled (domiciliés fiscalement) in France are subject to a 24% withholding tax, which is deductible from their personal income tax liability in respect of the year in which the payment has been made. Social contributions (CSG, CRDS and other related contributions) are also levied by way of withholding tax at an aggregate rate of 15.5% on such interest and assimilated revenues received by individuals who are fiscally domiciled (domiciliés fiscalement) in France.
Luxembourg – Taxation
The following information is limited to withholding tax considerations in Luxembourg relating to the Obligations Foncières that may be issued under the Programme. Each prospective holder or beneficial owner of Obligations Foncières should consult its tax advisor as to the tax consequences of any investment in or ownership and disposition of the Obligations Foncières.
Please be aware that the residence concept used under the respective headings below applies for Luxembourg income tax assessment purposes only. Any reference in the present section to a withholding tax or a tax of a similar nature, or to any other concepts, refers to Luxembourg tax law and/or concepts only.
Withholding tax
Under Luxembourg tax law currently in effect and subject to certain exceptions (as described below) there is no Luxembourg withholding tax on payments of interest, including accrued but unpaid interest.
In accordance with the law of 25 November 2014, Luxembourg elected out of the withholding tax system in favour of an automatic exchange of information under the Council Directive 2003/48/EC on the taxation of savings income as from 1 January 2015. Payments of interest by Luxembourg paying agents to non resident individual holders of the Obligations foncières and to certain residual entities are thus no longer subject to any Luxembourg withholding tax.
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In accordance with the law of 23 December 2005, as amended, interest payments made by Luxembourg paying agents to Luxembourg individual residents and to certain residual entities are subject to a 10% withholding tax.
Responsibility for withholding such tax will be assumed by the Luxembourg paying agent.
Foreign Account Tax Compliance Act
Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986 (“FATCA”) impose a new reporting regime and potentially a 30% withholding tax with respect to certain payments to (i) any non-U.S. financial institution (a “foreign financial institution”, or “FFI” (as defined by FATCA)) that does not become a
“Participating FFI” by entering into an agreement with the U.S. Internal Revenue Service (“IRS”) to provide the IRS with certain information in respect of its account holders and investors or is not otherwise exempt from or in deemed compliance with FATCA and (ii) any investor (unless otherwise exempt from FATCA) that does not provide information sufficient to determine whether the investor is a U.S. person or should otherwise be treated as holding a “United States Account” of the Issuer (a “Recalcitrant Holder”). The Issuer is classified as an FFI.
The new withholding regime will apply to “foreign passthru payments” (a term not yet defined) no earlier than 1 January 2017. This withholding would potentially apply to payments in respect of (i) any Obligations Foncières characterised as debt (or which are not otherwise characterised as equity and have a fixed term) for U.S. federal tax purposes that are issued after the “grandfathering date”, which is the date that is six months after the date on which final U.S. Treasury regulations defining the term foreign passthru payment are filed with the Federal Register, or which are materially modified after the grandfathering date and (ii) any Obligations Foncières characterised as equity or which do not have a fixed term for U.S. federal tax purposes, whenever issued. If Obligations Foncières are issued on or before the grandfathering date, and additional Obligations Foncières issued after that date are assimilated or consolidated with such Obligations Foncières issued on or before the grandfathering date, the additional Obligations Foncières may not be treated as grandfathered, which may have negative consequences for the existing Obligations Foncières, including a negative impact on market price.
The United States and a number of other jurisdictions (including France) have entered into or agreed in substance to intergovernmental agreements to facilitate the implementation of FATCA (each, an “IGA”). Pursuant to FATCA and the “Model 1” IGA released by the United States, an FFI in an IGA signatory country generally would be treated as a “Reporting FI” not subject to withholding under FATCA on any payments it receives if it reports certain information in respect of its account holders to the IRS or to its home government. Further, an FFI in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA (or any law implementing an IGA) (any such withholding being “FATCA Withholding”) from payments it makes on securities such as the Obligations Foncières. The United States and France have entered into an agreement based on the Model 1 IGA (the “U.S.-France IGA”).
The Issuer expects to be treated as a Reporting FI pursuant to the U.S.-France IGA and does not anticipate being obliged to deduct any FATCA Withholding on payments it makes. There can be no assurance, however, that the Issuer will be treated as a Reporting FI, or that it would in the future not be required to deduct FATCA Withholding from payments it makes. Accordingly, the Issuer and financial institutions through which payments on the Obligations Foncières are made may be required to deduct FATCA Withholding if (i) any FFI through or to which payment on such Obligations Foncières is made is not a Participating FFI, a Reporting FI, or otherwise exempt from or in deemed compliance with FATCA or (ii) an investor is a Recalcitrant Holder.
For Obligations Foncières held through Euroclear France, Euroclear and Clearstream, Luxembourg (the “ICSDs”), it is expected that FATCA will not affect the amount of any payments made under, or in respect of, the Obligations Foncières by the Issuer, any paying agent and the ICSDs, given that each of the entities in the payment chain between the Issuer and the participants in the ICSDs is a major financial institution whose business is dependent on compliance with FATCA and that any alternative approach introduced under an IGA will be unlikely to affect the Obligations Foncières. However, a Materialised Obligation Foncière may be taken out of the ICSDs by a holder of a Temporary Global Certificate issued in connection with such Materialised Obligation Foncière. In this case, a non-FATCA-compliant holder of definitive Bearer Materialised Obligations Foncières could be subject to FATCA Withholding, as discussed above.
FATCA is particularly complex and its application is uncertain at this time. The above description is based in part on regulations, official guidance and the U.S.-France IGA, all of which are subject to change or may be implemented in a materially different form.
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