French tax

McDonald’s agrees to pay $1.3 billion to settle French tax dispute

The logo of a McDonald’s restaurant is seen in Bordeaux, France, June 18, 2018. REUTERS/Regis Duvignau/File Photo

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PARIS, June 16 (Reuters) – McDonald’s (MCD.N) has agreed to pay $1.3 billion in fines and back taxes to settle a tax dispute in France, ending a long investigation aimed at determine whether the American burger chain had correctly reported all of its income in the country.

The case centered on allegations, which first emerged in 2014, that McDonald’s had diverted fees paid by its franchised restaurants to units located in other countries, thereby reducing its taxable income in France.

French media reported as authorities scrutinized royalties paid to a Luxembourg subsidiary. The French headquarters of McDonald’s was raided by police in 2016 as part of the investigation.

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McDonald’s lawyers said the settlement did not constitute an admission of guilt. “It’s a legal agreement (…) to avoid a trial, which is a very long and necessarily uncertain process,” lawyer Denis Chemla told the press.

The settlement is similar to a billion-dollar deal Google, now Alphabet Inc (GOOGL.O), struck in 2019 to end a French case where it was also accused of unfairly shifting profits.

McDonald’s has 1,500 restaurants in France, many of which are franchises that pay a royalty to McDonald’s for the use of the restaurant’s brand, computer systems and decoration.

In a statement on Thursday, McDonald’s said the tax settlement reached – which ends tax and criminal charges against it – covered the use of its trademark and know-how for the years 2009-2020.

He said that during this period the company had paid more than 2.2 billion euros ($2.29 billion) in taxes in France and created nearly 25,000 jobs.

($1 = 0.9608 euros)

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Reporting by Juliette Jabkhiro; written by Silvia Aloisi; edited by Jason Neely and Jane Merriman

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