The stakes for companies in customs matters - PwC France · appears obvious at first glance,...

Pocket Guide

The stakes for companies in customs matters

Pocket Guide written by

September 2012

Collection directed by

Claude LOPATERPwC Partner, “Consultations and Publications” PwC

Landwell & Associés, member of the PwC network

Bertrand RABODirector - [email protected]

Stéphanie THOMASLawyer, [email protected]


Pocket Guide


Why should we be interested in customs-related questions?

Nowadays, these questions number among the unavoidable concerns for financial, fiscal or logistics managers involved in international trade matters. At a time of crisis and with ever intensifying competition on the international markets, the opportunities offered and risks posed by customs regulations cannot be ignored.

However, there are still many companies with a poor knowledge of customs matters, despite the extensive and rapid developments the regulations have undergone, the chief characteristic of which is the dematerialisation of customs declarations.• How can we benefit from customs opportunities and

minimise customs duties? • How can customs management be optimised in a company?• What is the best way to settle a customs dispute?

The aim of this Pocket Guide is to demonstrate the stakes in customs matters and provide the key for optimising and securing an area that is complex but full of possibilities.

Bertrand RABO

Summary

The basics

Why should companies take an interest in their customs operations? 8

Customs law: Community law with a good deal of specific national features? 9

How can a company optimise the customs duty it pays? 10

How can a company’s customs duties be optimised? 11

What should be done in the case of a customs audit? 12

What are the risks involved in customs matters? 13

Managing the risks in customs matters

Customs value: which taxable basis to use for imports? 16

Tariff classification: what needs to be done to classify goods properly? 18

How to optimise the products’ customs origin? 19

How can you manage your proof of export? 21

What are dual-use goods? 22

Optimising flows

Optimising flows: What do the customs officials have to say about it? 24

Which procedures to choose? 25

Authorised economic operator (AEO): Should you become one? 26

The Customs Authority's other roles

What are excise duties? 30

Customs and environment: what is the General Tax on Polluting Activities? 32

The basics

The basics

8 – Pocket Guide PwC

Why should companies take an interest in their customs operations? All too often, it is only in the course of an audit of customs operations by the Customs Authority that a company’s managers will discover the risks connected with customs-related activities that are badly managed or inadequately secured. There is nothing at all unusual about the situation: operations may have been entrusted by the company to a customs professional, a forwarding company or customs clearance agent, who did not have sufficient or sufficiently up-to-date information to fill out the customs declaration in compliance with the regulations. By way of an example, classification errors may have been made because this customs professional did not have all the technical information at his or her disposal to provide the correct product nomenclature for customs, or for example the product may have been accompanied by preferential origin documentation for imports, whereas it ought not to have been. Finally, certain costs which should have been included in the taxable basis used for customs clearance may not have been taken into account. The Customs Authority, endowed with broad auditing powers will in such a case rectify import declarations undertaken over the last three years and impose fines, since it considers errors in declarations made by a customs professional in the name of the company as infringements. In the end, the bill may be large and the consequences may be disastrous, especially if the sums claimed by the authority were not or only partially covered by accounting provisions in the absence of the necessary information.

It is necessary to master customs-related information with the greatest care in light of the risk to which it gives rise for companies and the high fines imposed when the rules are infringed. This translates into the need for a review of the

The stakes for companies in customs matters – 9

information flows linked to cross-border trade in goods, the need for contracting with customs and transport professionals on clear bases and for customs parameters to be more effectively taken into account by those exercising the various functions in the company concerned (finance, purchases, logistics, etc.).

Customs law: Community law with a good dealof specific national features?Closely embroiled with the dynamics of the Single Market and the Trade policy of the European Union, customs law is essentially Community law applying to a single territory, which encompasses the territories of the 27 Member States. Therefore, once merchandise has been cleared by customs at one point of this Customs Union, in strictly customs-related terms, it may move freely throughout the remainder of this territory. It also follows that, as a matter of principle, the powers of the various customs authorities of the Member States are restricted by decisions from Brussels and that they are merely the secular arm of a corpus of common standards decreed by the Community institutions. This is all the more so since the customs resources are independent resources which directly supply the European budget. Similarly, the national Customs are in charge of the proper functioning of the Common Agricultural Policy (CAP), one of the first integrated European policies.

However, European integration in customs matters does have its limits. Firstly, the Member States have not completely given up all their powers in the area. This is particularly the case as regards the supervision and criminal-law processing of customs disputes whose procedures and penalties still largely depend on national regulations. To a lesser degree, it is also abundantly clear to operators carrying out customs operations in several Member States that customs practice varies from one country to another.

The basics


The new Community Customs Code which will enter into application in 2013 at the earliest will not do much to change this state of affairs and could impose additional restrictions on French operators: e.g., since under French law, any error in a customs declaration is assessed in terms of criminal law, statute-barring, which currently occurs after 3 years, may be extended to ten years in accordance with the provisions of the new Code.

How can a company optimise the customsduty it pays?Unlike the case of VAT, which must also be paid by companies when importing goods into Community territory, customs duties may not be claimed back and represent a charge for companies carrying out import operations. It should be recalled that in Europe customs duties are not levied on exports.

Thus, it is in the interest of importing companies to optimise the import duties on components or raw materials. The Community Customs Code provides for a wide range of optimisation methods, which have the disadvantage of requiring either approval by the Customs Authority or meticulous and correctly documented preparation in order to avoid rectification in the case of subsequent audits.

It is possible to optimise customs duties through two types of measures, the first of which concern the information to be included in the customs declaration. Consequently, we need to pay very special attention to the description of goods, their origin and value. Even if the identification of these data appears obvious at first glance, customs legislation makes matters more complicated and it is essential for a company with regular flows of imports to optimise and also to secure the information to be declared to Customs.

The second type of measures are those requiring approval by the Customs Authority, which are even more closely linked to


the flow or the location of the goods on Community territory. It is therefore necessary to consider the storage of the goods or trade with non-EU countries with a view to optimising the duties. There too, substantial savings can be made.

Each time goods cross a border, customs duties can be optimised and it would be a mistake for companies to fail to take up these opportunities!

How can a company’s customs duties be optimised?By contrast with a company’s taxes, its customs operations are in most cases outsourced and entrusted to a customs clearance professional: a customs clearance agent or a forwarding agency connected with the transportation of the goods.

In many cases this is justified, given how specific and complex the customs formalities to be carried out are. However, having these formalities seen to by a service provider does not exonerate the company from its customs-related liability. This liability may be shared by the company and its customs professional or may be borne by the company alone. The consequences of the choice of one or the other model are clearly not neutral for a company. They require the company to copper-fasten its relations with these professionals through contracts that ensure that it will not be exposed to any unpleasant surprises in the case of audits by the Customs Authority.

NB: a customs clearance power of attorney is a classic power of attorney governed by civil law, linking the company with the customs agent in matters relating to representation to the Customs Authority. Thus, it is particularly useful to specify the relationship between the two parties and the obligations of each of them, for example in a set of specifications in order to avoid any nasty surprises.

The basics


Other matters to be attended to and which are very often neglected are: the choice of Incoterms, which has consequences in the area of international trade, the management of proof of VAT exemption, which relies on the proper management of customs documents and finally the need to inspect the customs duties paid.

What should be done in the case of a customs audit?Customs audits, which are not well known and tend to be poorly understood, can have grave consequences for the companies submitted to them. This type of audit, unlike tax audits, still allows very little scope for mounting a defence. That is one of the reasons why you must be prudent if the Customs Authority decides to audit your company’s customs operations.

The Customs Authority has considerable powers to investigate, seize documents and inspect company premises.

It should be recalled that the Customs Authority has the right to inspect customs operations extending back three years prior to the report on the opening of the audit. This report may take the form of a simple request for information concerning the company. The Customs Authority is never bound to specify the scope of its inspection or the points that will be examined in the course of same. The audit will be continued and the Customs Authority will write up reports on its investigation and conclusions, which record the documents handed over by the company or seized from its premises and the statements made by the company’s employees. At the end of the audit, the authority will issue an Opinion on the Outcome of the Inquiry that will inform the company of the authority’s objections.


Very special attention should be paid to the replies given to the Customs Authority’s questions, which will be included in the reports. Do not hesitate to have the drafting of these replies as proposed by the authority amended and, in the case of its refusal to do so, enter the necessary comments in the space reserved for comments by the company. You should be aware that if the customs dispute is contested before the courts, the wording of the reports and the comments made in them by the company will be of paramount importance. Similarly, it is a good idea to reply to the Opinion on the Outcome of the Inquiry in order to notify the Customs Authority of the company’s position and to begin constructing a defence.

What are the risks involved in customs matters?In France, most of the errors discovered by the Customs Authority in the course of its audits are classed as criminal law matters even if they are not classed as fraud. It should be recalled that the Customs Authority may look at imports and exports undertaken up to three years prior to the date of the report on the opening of the audit.

In the absence of any fraud and despite the company’s good faith, it may have committed customs infringements or even misdemeanours. The Customs Authority will then demand the payment of the customs duty and VAT that should have been disbursed, in some cases going back several years, and it will also impose fines. Furthermore, because of the criminal-law classification, an action may be brought on the basis of the company director’s liability.

In customs matters, the maximum amount of fines provided for by the French customs code may seem exorbitant. Most cases are restricted to monetary fines although custodial sentences are sometimes applied when it is established that fraud was committed.

The basics


In most cases, in particular where the company acts in good faith, the Customs Authority will offer the company a deal. The amounts of the fines proposed will be significantly less than those laid down in the Customs Code but you should be aware that accepting the deal implies that you have renounced the right to bring a legal action to challenge the imposed rectification as ill-founded.

Case study:The company Alpha has been importing LCD screens for several years, which its forwarding agent at Le Havre declares under a customs nomenclature code with 0% customs duties to pay. Following an audit by the Customs Authority, the latter contested the classification used by the forwarding agent and held that the applicable customs duty rate was 14%. It rectified the company’s activities over the preceding three years based on a customs value of 5 million euro with a total amount of customs duties evaded of 700,000 euro.

The Customs Authority did not contest the company’s good faith and by way of a deal proposed a fine of 60,000 euro whereas, in principle, on the basis of articles 412 and 414 of the French national code, in a case like this Customs could have claimed several hundreds of thousands of euros. The company Alpha had initially considered contesting the Customs Authority’s decision before the courts but renounced any legal action in light of the uncertain outcome and accepted the Customs Authority’s deal.



Customs value: which taxable basis to use for imports?The customs value declared for imported goods by a company directly affects the amount of customs duty to be paid upon import. This value serves as a base for the level of customs duties collected on imported good. Thus, the higher the value, the more the customs duty to be paid will rise.

Usually, the value used in the customs declaration is the value indicated on the invoice, to which the forwarding agent charged with customs clearance adds the transport costs up to arrival in the EU and also the insurance costs. This is what is called the transaction value.

There are two stumbling blocks to be avoided when declaring this value: • The first is a failure to optimise this declared value, i.e.

information which should have appeared but does not is not taken into account (that is often the case, for example, with certain fees, sales commission or the cost of certain contents (e.g. equipment) or, on the other hand, it may have been possible to reduce the value (transport costs taken into account more effectively, exclusion of purchase commission, etc.). Similarly, in the context of subsequent international sales, it is possible to use the first export sale price as a customs value without taking account of subsequent sales, which allows us to eliminate any middlemen’s mark up and margins from the taxable base.


• The second is to use a customs value that does not comply with customs regulations. Thus, the invoice or so-called “transaction” value does not apply or may be challenged if the goods were not sold or the sale occurred between members of the same Group. Thus, in the case of a sale among affiliated companies, the price used to determine the customs value must meet certain conditions and in particular may not be influenced by the association between the parties or by any restrictions or conditions subsequent to the sale. If these criteria for the transaction value are not met, substitution methods as defined in the EU customs code must be applied by agreement with the Customs Authority.

We should also draw attention to the matter of consistency between the conditions defined in the customs regulations concerning the price to be used in order to determine the customs value and the requirements which companies must meet regarding transfer pricing. In fact, there are cases in trade between affiliated companies, where meeting the transfer pricing obligations and complying with the customs rules can be a real headache. The reason for this complexity is that the two systems are based on different principles: the customs rules attempt to determine the value of goods based on information concerning the individual transaction at the time of import, whereas the transfer pricing rules determine a value for the goods based on the available information in relation to all transactions over one or more financial years.



Tariff classification: what needs to be doneto classify goods properly?The Customs Authority has a very unique way of defining a given item of merchandise.

At global level, within the World Customs Organisation, and then within various countries or groups of countries such as the European Union, numerical codes are attached to product descriptions or product types. Each of these codes corresponds to a customs duty and the application, if applicable, of specific measures of commercial policy.

During the import or export of goods, it is mandatory for the operator to use this eight-digit code (in the case of the EU), which will allow the Customs Authority to check the identity of the goods and verify that the correct customs duty rates have been applied to them. This operation, which is called tariff classification and which is generally entrusted to a customs professional, forwarding agent or customs clearance agent, may in practice turn out to be a delicate one. It may sometimes be difficult to pinpoint the imported or exported product in this nomenclature of codes and descriptions. The matter may prove all the more risky since there is a great range in the levels of customs duty applied for different codes representing product types within the same category. Thus, there is a risk of making a mistake and in this case the Customs Authority will not hesitate to inspect the goods classification and correct it, sometimes with regard to past years (up to the legal limit of three years) and even impose fines.

From this perspective and in light of the financial risks encountered, it may be useful for a company to check the classification made by the service provider seeing to its customs declarations, who may not always have solid technical knowledge of the goods in question and who will


often be working to a tight deadline without necessarily optimising the classification and therefore the customs duties paid by the company. Taking stock will generally pay off, either allowing savings to be made by managing the level of customs duties as effectively as possible or by avoiding a risk that may ultimately have devastating consequences.

How to optimise the products’ customs origin?Origin is a fundamental concept for customs and one of the three pillars of customs clearance, alongside tariff classification and value. Its indication is mandatory both for imports and exports and it cannot be taken lightly, since the European Union wishes to encourage international trade with certain third countries by granting reductions/ exemptions in customs duties for products deemed to originate in those countries. The difficulty of determining the origin of goods is due to the multiplicity and complexity of the agreements associating the European Union with its commercial partners.

The first possible source of confusion is that the origin for customs purposes is not always determined in accordance with the goods’ provenance. The concept of customs origin refers to rules regarding the material content of products, added value and manufacturing processes.

The second source of confusion results from the existence of two different types of customs origins: there is a so-called preferential origin which makes it possible to obtain a customs duty reduction/ exemption in trade between countries linked by a commercial agreement and a so-called non-preferential origin in Community law, which must be declared each time the border is crossed.

Preferential origin has a direct impact on the customs duty paid by the company and this constitutes a source of optimisation that should not be overlooked. However, this



type of preference is limited by strict conditions aimed at preventing fraud and the diversion of traffic. For this purpose, goods benefiting from the preference must be accompanied by a certificate of origin in the correct and proper form - or by an indication on the invoice or commercial papers, the latter being, however, a simplification that must be requested from the Customs Authority – and in particular they must respect the rules on origin, the application of which is strictly monitored by Customs Authority.

Ultimately, in most cases optimising and securing preferential origin concern the entire supply chain and require making both parties, the buyer and seller, liable. In the case of imports, the preferential origin is an indispensable part of the information to be taken into account in relation to indicating the production location. In the case of exports, because of the tariff preferences that the client will expect in the country into which the goods are imported, preferential origin can really boost sales. In both cases, because of strict monitoring by the authorities in this area, this step is not without risks of its own and must be clearly managed.


How can you manage your proof of export?Secured management of customs operations may also have an impact in the area of VAT for both imports and exports.

Deliveries of goods outside of the EU are VAT-exempt provided that the operator can prove that the goods actually leave the EU territory.

The master proof in this area remains the export declaration, the rules on which changed on 1 July 2009. There is no longer any need to furnish tax agents with copy 3 of the export declaration stamped by the customs office upon leaving the EU, but since the dematerialisation of export formalities and the setting up of the Export Control System (ECS), proof is computerised and presented in the form of an email from the customs office of exit signing off on the declaration. If customs formalities are entrusted to a service provider, you must ensure that there is a system in place for monitoring whether ECS messages have been signed off on electronically, which will allow fiscal evidence to be provided in the event of an audit.

Moreover, the General Tax Code allows the possibility of providing alternative evidence: customs declarations in the destination country, transport documents providing evidence of the goods’ exit, etc. If these requirements are not met, VAT will be due and the amounts rectified will be accompanied by a fine.

As you can see, ultimately there can be a heavy price to pay and while it is prudent to keep alternative evidence of the goods’ exit, good management by the service provider of the export formalities under the supervision of his or her client is absolutely essential for companies.



What are dual-use goods?Did you know that exporting airbags, fluoridated bolts, equipment containing cryptology, to give just a few examples, may be subject to the regulations on dual-use goods, i.e. equipment that could be used for a potentially military purpose?

More and more companies find their goods blocked by the export customs and receive hefty fines for their disregard of the legal provisions on military goods or goods that have a dual use, civilian and military. In accordance with this legislation, the export of these goods is subjected to specific prior formalities by virtue of their sensitive nature.

The regulations on monitoring the export of dual-use goods and technologies constitute a weapon for combating the distribution of conventional weapons and the proliferation of weapons of mass destruction. In practice, much of these goods and technologies are intended for civilian use but nevertheless could be used for military purposes: navigation systems, computers, nuclear equipment, propulsion systems, chemical products etc. are just a few examples of goods and technologies considered to have a dual (i.e. civilian and military) use according to this legislation.

Prior to export, each company must identify its goods and/or technologies subject to regulations concerning dual-use goods and technologies and request export permits from the Customs Authority prior to dispatch. Failing this, export is strictly prohibited. For the purpose of correct identification, a good knowledge of the possible uses and the composition of the goods and/or technologies to be exported is mandatory.

Note: it is absolutely indispensable to carry out these administrative steps well in advance, as the authority has a fairly long deadline for deciding whether or not to grant a permit.

Optimising flows

Optimising fl ows


Optimising flows: What do the customs officials have to say about it?Although they are all too often neglected due to insufficient knowledge of the existing measures or in the absence of suitable administrative staff for managing them, opportunities for customs optimisation really do exist and they often allow companies to make real cash savings. Obviously, they only concern imports since there are no export duties in Europe.

The existing measures are of two different kinds. The first are connected to what we might call the “identity card” of the imported goods, which must be documented in the customs declaration. This is the nomenclature code used to define the goods, their origin and value and which will serve as a base for calculating customs duties and VAT. Declaring this information properly, which at first glance may seem a matter of course, must in practice be undertaken with care, since its various components are the Customs Authority’s favourite subjects when they audit a company.

Other types of measures are those connected with flows of goods. With a view to optimising the customs duties to be paid, it should be examined, for example, whether the imported goods are intended to leave the EU again after having undergone industrial processing there or if they are intended to be re-exported, or if goods exported outside of the EU will be processed into finished products abroad and re-imported into one or more EU countries. In these different scenarios, where duties would normally have to be paid each time a border is crossed, an authorisation may be requested from the Customs Authority with a view to optimising the duties to be paid. Take care with this as well: if the Customs Authority is in most of the cases willing to grant these authorisations, the operator must be vigilant in the management of authorisations and customs documents relating to them, on pain of having to pay hefty fines if it is audited.


Which procedures to choose?Customs regulations are not limited to monitoring international flows of goods and ensuring the receipt of customs duties. They also aim at encouraging economic activity in a territory in connection with the international sale of goods. In order to achieve this, there is a whole range of procedures and regimes aimed at facilitating customs formalities and optimising customs duties.

In general, these procedures are subject to prior authorisation by the Customs Authority, the form of which will vary in accordance with the type of advantage sought. The objective for the Customs Authority is to be able to monitor the use of the regime granted in order to avoid any fraud. A precise description of the operations envisaged, a banking guarantee to cover the suspended duties and follow-up documentation on the regime are prerequisites that the Customs Authority always insists upon in such cases.

Therefore, you will need to identify the most appropriate procedure to meet the operator’s need(s). Is this a need for storage followed by sales in Europe and re-export to a country outside of the European Union or is it a need to buy raw materials or components in third countries for manufacturing in Europe and re-export? Is an industrialist purchasing supplies on third markets because the product he needs is no longer manufactured in the European Union or does he wish to bring in prototypes from abroad for an exhibition or trade show?

Customs legislation is teeming with procedures that allow customs duties to be optimised. You need to identify precisely which regime is best adapted to the need envisaged and not to forget to use the regime in accordance with the legislative requirements. Here too, the Customs Authority’s audits are merciless.

Optimising fl ows


Authorised economic operator (AEO): Should you become one?Authorised Economic Operator is a customs certification that appeared in the rush of measures adopted in response to the terrorist attacks of September 11th 2001.

Companies and more generally all operators involved in international commerce need to obtain certification from the Customs Authority granting them the status of a reliable operator in international trade. This certificate may concern either customs activities or only their security/ safety aspects. It may also combine these two aspects. It is up to the operator to request the certificate most appropriate for its situation.

This certification is granted or not at the end of an audit by the Customs Authority aimed at establishing whether the company presents sufficient guarantees in terms of customs and security/ safety matters for its installations and the flows that it is called upon to manage.

Up to now, the Customs Authority has not made this certification obligatory and its granting has been accompanied by advantages, which however remain limited (e.g. choice of customs inspection location, in principle).

However, being an AEO today may be advantageous in a number of ways: • Firstly because at the very least it constitutes recognition by

the Customs Authority in an environment where more and more players have already obtained it, so it may have an impact in terms of an operator’s brand image and positioning within the supply chain or with regard to its clients.


• It is also an opportunity to review the current situation as regards practices in the area of international trade. Preparing for a customs audit not only leads to customs risks being reviewed but also allows a review of working conditions with the various service providers in the area of customs (in particular customs clearance agents) and more generally it allows companies to develop a code of good practices, which will allow it to avoid expensive disputes with the Customs Authority in future.

AEO accreditation takes up time and resources for a company, while the customs advantages remain limited. However, it may turn out to be a real boon in terms of optimising and securing the regulatory dimension of international commercial operations, allowing an operator to continue to work in this area on a healthy footing.



Independently of its import and export tasks, the Customs Authority has been given that of levying indirect taxes, the principles of which are laid down in Community directives or national regulations. These taxes concern specific products like tobacco, alcohol or energy products, their aim being to discourage consumption, and there are also taxes that have been introduced to respond to concerns about environment or health.

What are excise duties? Since 1 January 1993, the Customs Authority has been in charge of levying excise duties on the consumption of products on which they are imposed: energy products, alcohol and tobacco.

Excise duties are a form of indirect taxation and unlike customs duties they relate to quantity, not value. In principle, they are applied without discrimination to products manufactured locally and imported products. However, excise duties only apply once the products in question are placed on the market.

As regards alcohol, the principle is that excise duties are disbursed by the operator and redeemed from the sale price to the consumer. In accordance with the European directives, in order for companies to avoid having to pay a significant cash advance and waiting to claim back the excise duties at the time of sale to the end consumer, their payment is postponed until the latest possible point in the distribution chain. In return for this benefit, Community regulation provides for customs monitoring of these products over their cycle from the time of their production (or import) to that of their sale to the end consumer. Thus, it is mandatory for operators to meet the requirements of the relevant regulations in full.

In the same way, with the aim of facilitating the free movement of the goods concerned within the Single Market, a duty suspension during storage and movement has been


provided for. Since 1 January 2011, the intra-Community movement of alcoholic drinks with suspension of excise duties has been dematerialised and must be documented electronically. The computerisation of the monitoring of the intra-Community movement of products subject to excise duties was developed through the European EMCS (Excise Movement and Control System) project and its French derivative, Gamm@.

Although in the area of excise duties we tend to think above all of alcoholic drinks, the domestic tax on petroleum products (taxe intérieure sur les produits pétroliers or TIC) in France or taxes on tobacco are also subject to excise duties collected by the Customs Authority.

Moreover, there are other indirect contributions, comparable to excise duties that are also collected by the Customs Authority in France. By way of examples, we may mention:• The so-called “pre-mix” tax on mixed drinks containing

more than 1% alcohol, • The tax on spirits with high alcohol content (over 25 percent

proof),• The tax on all electronic products that are difficult to

dispose of because of their environmental toxicity (generally known as the “eco-tax”) paid to a fund financing their recycling and research in this area,

• The tax on digital or analogue data carriers allowing replication paid to a fund for media artists and producers (release of music, films, books and software) intended to remunerate their legal right to copyright.

• The so-called “soda tax”, which entered into force on 1 January 2012, on drinks containing added sugar.



Customs and environment: what is the General Tax on Polluting Activities?The General Tax on Polluting Activities (taxe générale sur les activités polluantes or TGAP) recovered by the Customs Authority is aimed at making operators liable on the basis of the ‘polluter pays’ principle, making them more aware of the problems relating to waste disposal and getting them to contribute to it. This tax is proportional to the level of pollution caused by any activity (production of industrial and household waste, atmospheric pollution, noise pollution, etc.).

The objective of the TGAP is to help to alter behaviour and to encourage companies to adopt economic methods that are more respectful of the environment. This translates into a range of tax exemptions and reductions for companies that voluntarily commit to certain environmentally friendly measures.

Those owing tax are bound to spontaneously declare the tax owed and, if it is paid in the form of a down payment on the basis of declarations for the previous year, a rectification must occur by the end of the year to take account of what is actually owed for the year underway.

It should be noted that the collection of these taxes has been entrusted to the Customs Authority, given its ability to monitor the tax owed.

A variant of the TGAP, or the “printed matter TGAP”, is a tax imposing a sanction to be borne by persons who issue or have others issue paper printouts and/or paper for graphic use and who have not voluntarily contributed to the recycling and disposal of paper waste.

The “printed matter TGAP” will only be due where the party owing the sum has not disbursed its voluntary financial contribution. This contribution is managed and recovered by Eco-folio, an organisation certified by the government for this purpose.

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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specifi c professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Landwell & Associés does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. This publication (and any extract from it) must not be copied, redistributed or placed on any website, without Landwell & Associés’ prior written consent. © 2012 Landwell & Associés

Landwell & Associés is a member of the PwC international network, of which each member is a separate legal entity. is the brand under which these members conduct their activities.

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