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also subject to taxation under Class II (stamp fee for coupons) on the total set aside for coupon payments on the date of maturity.

In accordance with the law of October 29 (B. G. Bl. No. 396), bonds issued by production, trading, and transportation enterprises prior to December 31, 1926, are exempt from the above-mentioned loan contract tax ("Darlehensvertragsgebuehr ") established by T. P. 36 of the law of December 13, 1862 (R. G. Bl. No. 89). The coupons of such bonds are also exempt from the coupon stamp fee.

DIRECT TAXES

No direct taxes come into consideration when emitting shares and obligations. Sums set aside for the interest service of capital invested in enterprises, however, are subject in principle to the corporation tax levied on such companies, since, in accordance with paragraph 94 (lit. c of the P. St. G. B. G. Bl. No. 307 of 1924), such sums must be included in the taxable net yield. The corporation tax amounts to 36 per cent of the taxable net yield not less than 3.6 per cent of the capital invested. It is pointed out that a bill proposed by the Federal Government is now before the National Council (amendment to tax op earnings of 1924), which among other things contemplates a reduction of the corporation tax from 36 to 25 per cent, retroactive to 1924.

Special privileges are provided for the interest payments on bonds issued by producing, trading, and transportation enterprises between November 6, 1924, and December 31, 1926, as well as for the interest service of loans made within the above-mentioned period by such enterprises, not against bonds but on land book security, from institutions regularly engaged in the transaction of credit business, which in turn issue bonds on basis of the credits granted. (Pfandbriefe, fundierte Pfandschuldverschreibungen.)

For a period of 25 years from the time the loan was taken up such interest is only subject to a corporation tax of 2 per cent. (Law of October 29, 1924, B. G. Bl. No. 396.),

BELGIUM

S. H. Cross, Commercial Attaché

Stamping of stocks and bonds issued by Belgian corporations in Belgium is regulated by the law of March 25, 1891.

Stocks and bonds floated for a period not exceeding five years from date of issue pay a stamp tax as follows: On an amount not exceeding 200 francs, 0.10 franc; on amounts between 201 and 500 francs, inclusive, 0.25 franc; on amounts between 501 and 1,000 francs, inclusive, 0.50 franc; on amounts between 1,001 and 2,000 francs, inclusive, 1 franc, etc., with an increase of 0.50 franc for each succeeding 1,000 francs without fraction.

On stocks and bonds floated for a period not exceeding five years the tax is: On an amount not exceeding 500 francs, 0.50 franc; on amounts between 501 and 1,000 francs, inclusive, 1 franc; on amounts between 1,001 and 2,000 francs, inclusive, 2 francs, etc., with an increase of 1 franc for each succeeding 1,000 francs without fraction.

These provisions apply to all forms of stock and values representing partnership in a limited liability association and to all bonds

issued by legal or commercial persons. They do not cover Government, State, or municipal bonds. The tax is due in all cases upon the nominal value, or, in case issue price of security is above nominal value, on this higher amount. In cases where nominal value is not given and where issue price appears to be below real value, the Government may compel declaration on real value under supervision of its accredited representatives. Articles applying above taxation measures are Nos. 12 and 14 of the law of March 25, 1891.

Stamping of securities issued by foreign companies is of later origin. In accordance with article 41 of the law of August 30, 1913, a stamp tax of 1 per cent is due on securities issued in Belgium by foreign companies. As in case of native values, tax is due upon nominal values, or if issue price of security is above nominal value, on this higher amount. Basis of levy in case of no-par-value stock is determined as above.

The law of August 30, 1913, articles 11 and 12, also fixes the tax levied on sale of securities. However, a law of August 28, 1921, has modified the original rate, raising it to 0.50 franc per 1,000 francs. By terms of the 1913 legislation this tax applies to every purchase or sale of securities contracted in Belgium through the intervention of a bank, an exchange broker, commission agent, or other individual qualified to effect the operation. The tax is due by both the purchaser and the seller and is calculated on the sum required to effect the transaction. It is not due by banks, exchange brokers, commission agents, etc.

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It is of interest to note the rates developed in Mr. Theunis's new tax project which is now before Parliament. Levy on issue of securities of five years or less maturity will be 0.25 franc for those of 250 francs or less, 0.50 franc for those between 251 and 500 francs, inclusive, 1 franc for those between 501 and 1,000 francs, with increase of 50 centimes for each further section of 500 francs. For securities with maturity over five years these rates are doubled. The 1921 tax on stock-exchange operations of 0.50 franc will be increased to 1 franc per thousand. The old rate remains, however, for negotiation of Government issues and securities with fixed revenue return. Moreover, a distinction is made on negotiation of foreign securities. These latter must in the future pay 0.50 franc on a value up to and including 25 francs, 1 franc on a value between 26 and 50 francs, and 2 francs on a value between 51 and 100 francs. On each subsequent section of 100 francs an additional levy of 2 francs is imposed.

FRANCE

David S. Green, Assistant Trade Commissioner

While no basic changes have been made during the past decade in forms of French taxation on the issue and sale of private securities, the taxation rates have been increased by successive fiscal laws to a degree more than the average increase for all revenue forms. This is only in line, however, with the trend of alterations in the French tax system, which has been characterized by a gradual increase in the relative importance of direct taxes affecting the wealthy classes primarily.

Three distinct taxes are levied on both French and foreign corporation issues. These taxes must be paid in advance for each quarter by the issuing corporation or firm. No objection is raised, however, to any action which may be taken by the issuing company to recover the whole or part of these payments from the security holders, although, of course, the company is obliged to legalize such an act by a clause in the issue agreement.

Very little distinction is made between stocks and bonds in French laws governing taxation of private issues. However, the régime now applicable differs in important respects between French issues and foreign issues. These two types will be discussed separately in this report, the pages immediately following being given over to explanation of the régime governing French issues. This in turn is followed by a section concerning taxation of foreign issues, and by one devoted to the present system of taxing the sale of private securities.

TAXES ON ISSUE OF FRENCH PRIVATE SECURITIES

Stocks and bonds issued by private French groups are subject to three forms of tax altogether distinct from the standpoint of purpose and of manner of application. These are: (1) Stamp tax of 0.12 per cent levied annually on the face value of the security; (2) transfer tax on bearer securities of 0.72 per cent annually; this tax is not on the face value, but in most cases on the average quotation during the previous year; in default of official means of establishing an average annual quotation, the corporation or firm is called on to furnish an estimate of its own; (3) tax on coupon payments, lottery payments, and special bonuses, amounting to 12 per cent of the amount of coupons or special bonuses paid and 24 per cent of lottery payments.

Stamp tax.-The stamp tax can be paid to the French Government either in cash or by fixed annual installments. If paid in cash it is due from the date of issue and varies as follows: For stocks, 1.2 or 2.4 per cent of the face value of the stock, depending on whether the firm was incorporated for less or more than 10 years; on bonds, 2.4 per cent of the face value, regardless of the nature and duration. of the firm. The law provides that the security shall be restamped without charge in case of transfer or renewal, provided the tax was paid on the original security.

The firms electing to pay the tax by fixed annual installments are required to pay annually an amount of 0.12 per cent of the face value of the securities issued. This payment is to be made by the officially accredited representative of the firm and is due annually (1) for stocks during the entire life of the firm, and (2) for bonds during the life of the issue. Once the taxable amount is fixed, the stamp tax on a stock issue will remain constant, regardless of any diminution which may be made in the capital of the firm. In case of new issues it will remain the same as long as the capital having served previously as a base for the levying of the tax is not exceeded. In connection with bonds, the taxable amount decreases in direct ratio to amortization effected.

Should the firm pass dividends for two successive years, or should it be placed in the hands of a receiver, the stamp tax on its stocks will

be suspended. However, neither of these events will cause any change in the stamp tax on the bonds. Once the firm elects to pay its stamp tax by annual installments, it can not change and settle its obligations to the French State by means of a cash payment.

Transfer tax.-The tax on transfer of French private stocks and bonds is due regardless of whether the securities were registered in the name of the holder or made out to bearer. For the former type (i. e., those which are made out in the name of the holder and which therefore can be traced at any time by the Government) the tax is 1.08 per cent of the average quoted price during the previous year, or the estimated annual quotation declared by the issuing firm. On securities the transfer of which can not be followed by the Government (i. e., bearer securities) the annual tax is 0.6 per cent, based as above for securities made out to the holder. In connection with securities made out to the holder the transfer tax is paid each quarter by the issuing firm. Conversion of a bearer bond into one made out to holder is exempt from a transfer tax.

Tax on coupon, lottery, bonus payments, etc.—This general form of tax is levied on the distributed profits and all other payments on stocks and founders' shares and also on all types of bonds. It is calculated on the basis of 12 per cent annually of the amount of these payments to security holders and is paid for by the issuing firm in quarterly installments. A similar tax has been established (1) on repayments of principal, in which case it is figured as the difference between the amount repaid and the quotation on which the issue was put out, and (2) on lotteries won by bondholders. The tax rates are 12 per cent on repayments of principal and 24 per cent on lottery winnings.

TAXES ON ISSUE IN FRANCE OF FOREIGN SECURITIES

Securities of foreign firms can not be issued in France or quoted on the official bourse until the firm has designated to the French tax authorities a French firm or individual as its representative in France. This representative is liable for regular payment of all taxes due. If the firm elects to pay certain of these taxes, not in a lump-sum form but under the annual provision, they are due only on the actual number of securities disposed of in France. On the other hand, they are due irrevocably and invariably during the entire life of the firm for stocks and during the life of the securities in the case of bonds, or until such time as the security should be withdrawn definitely and entirely from the French market. The issuing companies and their representatives in France can not effect financial service on these securities (such as payment of coupons, etc.) until these taxes are fully met.

Taxes due on foreign bonds and stocks correspond very closely to those collected on local issues. At present these taxes are (1) annual stamp tax of 0.12 per cent on the face value of all securities, (2) annual transfer tax of 0.72 per cent calculated on the average quotation of the security during the previous year, (3) tax of 12 per cent on payments to the security holders, with the exception of those in connection with lottery winnings, which are taxed 24 per cent.

In view of the difficulty to the French Government of determining the number of shares of a foreign issue which are subscribed and 37834-25 9

held in France, no effort is made to keep track of the number of shares subject to the French tax. What the French Government does is to fix once for all a figure which it designates as the amount taxable ("quotité imposable") and which represents its idea of the fraction of the issue held in France. This fraction is fixed by the Minister of Finance after he has conferred with the Commissioner of Securities, and can not be less than one-tenth on stock issues and onefifth on bond issues. The issuing company has very little to say in determining this fraction, and once it is set has no recourse until the expiration of three years, when opportunity is given for revision. The annual stamp-tax payment on foreign stock issues is suspended if during two preceding years the company failed to vote dividends or interest. On bonds, however, the stamp tax continues to be due, regardless of the financial condition of the company, until the issue is withdrawn from the French boards.

While it is common for foreign companies disposing of some of their stocks in France to designate a French agent responsible for payment of French taxes, the foreign firms can avoid this requirement by depositing with the French Government a sum of money, the amount of which is determined by the director of the French bureau of registration, and which in practice is not less than a figure representing approximately the total of annual taxes due for a period of three years, figured on one-half the securities on which the registration has been requested.

As regards the incidence of taxes on registered foreign securities, it is generally admitted that the stamp tax is to be met by the local representative of the issuing firm, who is not permitted to recover it from the shareholders. On the other hand, the issuing companies are allowed to deduct from coupon payments to shareholders the amount paid as transfer taxes.

A separate régime is set up in France to cover tax liability of foreign securities which have not fulfilled all the French requirements for registration. On these nonregistered issues the holder is obliged to meet the stamp tax, which is based on the face value of the issue and which therefore discourages the circulation in France of foreign nonregistered securities sold at only a fraction of par. The tax on revenues to shareholders of foreign nonregistered securities is 14.4 per cent, or 2.4 per cent above that on similar registered securities.

FRENCH LAWS ESTABLISHING SECURITY TAXATION RÉGIME

There are given below translations of articles 48, 49, and 50 of the French finance act of June 25, 1920, and article 18 of the finance act of July 1, 1923. These, together with the fiscal act of March 23, 1924 (which increased most French tax schedules by 20 per cent), are the basic laws governing taxation of security issues:

ART. 48. The proportional stamp tax, established by article 14 of the law of June 5, 1850, on stock titles or certificates, is fixed at fr. 1 per frs. 100 and at frs. 2 per frs. 100, decimes included, according to the distinctions mentioned in the above article.

The proportional stamp tax, established by article 27 of the law of June 5, 1850, on bonds, is fixed at frs. 2 per frs. 100, decimes included.

The annual tax on subscriptions, established by articles 22 and 31 of the same law, amounts to fr. 0.10 per frs. 100, decimes included, whatever may be the time that the subscription was contracted.

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