The most productive employee at Renault does not work at the giant French carmaker's headquarters in Boulogne-Billancourt south-west of Paris, but in Malta. This unknown worker produces on their own an annual turnover of 108 million euros a year. For they are the sole employee of RCI Insurance Limited, one of Renault's two Malta-based insurance companies. The sole purpose of these cash cow companies is to avoid paying tax in France – at a time when many would argue that the French state has need of all the revenue it can get.
Another group to benefit from this practice has been French retail group Auchan, owner of brands such as home improvement stores Leroy-Merlin, which has reduced its potential tax bill by 22 million euros over a period of three years. Overall, between the three groups, this constitutes a total of 141 million euros avoided that the French tax authorities will never receive. And the figure is growing each year.
The arrangement involves so-called 'captive insurance' companies, which are defined as a “company that provides risk-mitigation services for its parent company”; in other words they insure the customers of its parent company. At Renault, through RCI Banque, and PSA, via Banque PSA Finance, they sell car insurance. Retailer Auchan's bank Oney insures cars and also homes. So, for example, if a customer takes out a 10,000 euro loan from RCI Banque to buy the latest Renault Kadjar, they have to take out insurance that will reimburse Renault in case of their death. It is a similar story when a customers uses the credit facilities on their Auchan card to pay for their shopping on a Saturday.
What customers do not know, however, is that their insurance premiums are ending up in Malta. It is a practice that has been nonetheless been known about for a while in some circles, with a 2013 report from the French Parliament raising concern over the use of captive insurance companies as a way to 'optimise' tax liabilities on a large scale. “It is in this way particularly easy to locate a captive [company] in a tax-friendly state … As the captive's business activity is by its very nature immaterial (it simply concerns internal group flow) the company dedicated to the insurance can be based anywhere on the globe,” said the report.
Traditionally, European multinationals base their insurance arms in Ireland or Luxembourg, But Malta has made huge efforts to lure such firms to its shores with two key attractions: flexible laws and huge tax advantages.
The most important tax benefit that Malta offers is a reimbursement of corporation tax for those foreign companies that pay dividends to their shareholders. These companies begin by paying corporation tax at the official rate of 35%. But after generous reimbursements by the Maltese tax authorities the real rate falls to just 5% against the 33.3% rate in France.
Oney Holding Limited's 2016 accounts show that last year the holding company received 23.8 million euros in dividends from the two insurers that it controls, and seven million euros in “other income”. What this “other income” refers to is explained in a short note in the report's appendix: it was a “reimbursement received under articles 48(4)(a) and 48(4A)(a)” of Malta's 1994 Income Tax Management Act (see document below). They are the articles which set out corporation tax reimbursements.
A similar reference to “other income” is found in the accounts of PSA Services Limited, the Maltese holding company that oversees PSA Peugeot Citroën's insurance companies. Oddly, there were no such other revenues in the years 2014 and 2015 – the last years for which accounts have been published – but in the previous five years the car manufacturer received corporation tax reimbursements totalling 57 million euros. A PSA spokesperson confirmed by email to Mediapart that the “other income” referred to in the accounts did indeed relate to the “accumulated corporation tax reimbursed by the Maltese state since 2009”.
However, the biggest beneficiary of the Maltese reimbursements has been Renualt. Between 2012 and 2015 its insurance companies got back a total of 62 million euros in corporation tax refunds. The accounts for 2016 have not yet been published but the levels of reimbursement has continued to grow, from 3.4 million euros in 2013 to 21.3 million a year from 2014 onwards.
Renault's two captive insurance companies are in effect huge cash cows. One of them, RCI Insurance Limited, received 108 million in premiums in 2015 and paid out just 10 million euros in customer insurance claims. That is a margin of 90%. “That's completely out of the ordinary. In our industry even 20% is a lot,” said the finance director of an insurance company to whom Mediapart showed the accounts.
PSA Peugeot Citroën, who employ 31 people in Malta, say that their staff numbers there represent all the people who work in their insurance business. “There are no staff working on insurance activity in France or elsewhere in other countries than Malta (apart from sales functions). The relatively reduced number number of workers is linked to the fact that the range of products sold is quite simple (two),” said a spokesperson.
PSA also say that their Maltese operation has been “examined and approved by the European tax services of the different state members and has never been called into question”. A spokesperson for Auchan's bank Oney said that their operations were “carried out with strict respect for the international conventions signed between the countries with whom this subsidiary works and the state of Malta”.
However, all three French companies, Renault, PSA and Auchan, are thought to be deeply embarrassed that their tax set ups in Malta have been subjected to public scrutiny. No senior executives from any of the groups wanted to talk to Mediapart and the only response came in the form of emails. Their line of defence can perhaps be summarised this way: that they have done nothing illegal and therefore it would have been wrong not to have taken advantage of the rules.
- The French version of this article can be found here.
English version by Michael Streeter
Si vous avez des informations à nous communiquer, vous pouvez nous contacter à l’adresse firstname.lastname@example.org. Si vous souhaitez adresser des documents en passant par une plateforme hautement sécurisée, vous pouvez vous connecter au site frenchleaks.fr.