Canal+ risks a tax adjustment of 655 million euros

The president of Canal+, Maxime Saada, during the general meeting of Vivendi, in , April 19, 2018. ERIC PIERMONT / AFP

When Canal+ is preparing its entry on the London Stock Exchange on December 16, and a few days before the 40th anniversary of the channel, on November 4, here is bad publicity for the television group of billionaire Vincent Bolloré.

In the regulatory prospectus published on October 30 with a view to this IPO, and spotted, on October 31, by The Informed (one of whose shareholders is Xavier Niel, also an individual shareholder of the Le Monde Group), the Vivendi subsidiary acknowledges having received “several proposals for rectification” from the French tax authorities, representing a total potential recovery of €655.6 million.

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The tax authorities accuse Canal+ of having unduly applied reduced rates of value added tax (VAT) during three separate periods. Between 2016 and 2019, the group used rates of 2.10% and 5.5% for some of its services (the Cafeyn digital press kiosk, for example). “which results in a proposed tax adjustment of 131 million euros”explains the Vivendi subsidiary. Canal+ is not the only one to have used this tax trick: telecom operators were caught for the same reason by the government in 2017.

“The group vigorously contests”

The biggest rectification accused of Canal+ concerns the period 2020-2021. For these two years, “French tax authorities allege that the group is not entitled to the 10% VAT rate, but instead applies the standard rate of 20% to all turnover, based on an allegation that [il] does not provide television services »Canal+ having become an aggregator of audiovisual content, live and on demand, including from external platforms such as Netflix, Disney+ and AppleTV+.

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For these two years, the amount of the tax adjustment proposal reaches 457.8 million euros. For the same reason, the Canal+ Group (which oversees the channel) received an adjustment notice of 66.8 million, covering the period from 1is May to December 31, 2019.

“The group vigorously contests the proposed tax adjustments”writes Canal+ in its prospectus. He objects in particular to the argument according to which he could no longer claim 10% VAT for the years 2020 and 2021. “French tax authorities have not provided any legal evidence that the 2021 VAT law change can apply retroactively to prior periods or that Canal+ no longer provides television services”he argues in his stock market document. The position of the tax authorities “according to which Canal+ no longer provides television services is in contradiction with the exact opposite position of the National Cinema Center”he adds.

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