AFD - 2018 Registration document

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STATEMENT OF NON-FINANCIAL PERFORMANCE

Fair practices

2.7.7 Initiatives undertaken to prevent tax evasion In an effort to contribute to French policies to combat tax havens, in particular those declared by France under the G8 and G20, AFD and Proparco adopted a rigorous and specific policy in 2009 regarding the transactions they carry out and the projects they finance in a non-cooperative jurisdiction (NCJ), or transactions and projects that involve one or several NCJs in the legal structure of the financed operation and/or offshore centres more generally (1) . Any project involving a counterparty registered in an NCJ (in terms of tax or AML/CTF) is considered high risk according to the risk classification of AFD and Proparco. The risk indicator related to geographic location ranks these countries as having a very high risk. Accordingly, the diligences expected will be more stringent than for projects not registered in these regions. When tax or AML/CTF NCJs are involved, AFD Group’s policy determines the types of transactions authorised and the types of projects eligible for the Group’s funding. The use of tax NCJs is either limited or prohibited, in accordance with this policy, which has been regularly updated since its adoption. This policy was also subject to an attentive review following the adoption of Act No. 2018-898 on the fight against fraud, with some of the provisions having an impact on the Group’s policy towards NCJs. More particularly: P the common EU list of non-cooperative jurisdictions for tax purposes, as adopted by the European Commission in December 2017 (“EU list of tax NCJs”), is integrated into the French list of Non-Cooperative States and Territories

(“NCSTs”) of the French Tax Code, which AFD Group takes into account in its definition of tax NCJs; P the law reformulated the forbidding of AFDGroup to contribute to the financing of a project if the controlling shareholder is registered in an NCST, except if said shareholder proves that their registration is justified by an actual economic interest in the state or territory in question, or when the financed project is carried out in the state or territory in question. The law commends the policy and procedure followed by the Group when it comes to NCJs (2) . However, it is worth noting that the integration of the EU list of tax NCJs in the French list of NCSTs, with the resulting financing restrictions, could have an impact on the projects that the Group may finance, in the light of any changes to the said list, left to the appreciation of the European Commission. Additionally, although the Act of 23 October 2018 provides for the integration of the EU List of tax NCJs in the French list of NCSTs, this integration will only be effective as from the publication of an order implementing Article 238-0 of the French Tax Code. If no such order has been issued, and to comply with the requirements of the European delegator, AFD Group has amended its procedures for projects delegated by European funds in order, in such a case, to consider as tax NCJs the countries and territories in the EU List of tax NCJs without waiting for the publication of any order by the French Budget Minister, in compliance with the Commission’s requirements for entities receiving such funding.

(1) Updated in 2016, the AFD Group policy on non-cooperative jurisdictions is available on the AFD and Proparco websites: https://www.proparco.fr/ sites/proparco/files/2017-07/Politique_publique_gpe_dans_JNC_Juillet_2016.pdf (2) In this respect, extracts of parliamentary texts are particularly useful: “The system recommended by the Senate establishes in law that which, today, is consistent with the financing policy implemented by AFD Group and which is justified by the effort to prevent the funding of development projects from benefiting only people or entities established in non-cooperative countries or territories that misappropriate cash flows intended to support populations”; “It should be noted at the outset that this system has no intention, and should not have the effect, of stigmatising AFD or its action; quite the contrary. The idea is to recognise the major efforts undertaken by AFD Group by establishing them in legislation”; “this article is by no means intended to stigmatise AFD or its subsidiaries. It strives to establish in law this Group’s virtuous policy by writing into legislation that which is currently […] a simple code of conduct. […] Considering the role and importance of AFD and its subsidiary Proparco, and the public origin of the funds, it is not inconsistent to raise this Group commitment to the normative level” (Extract from the Draft law on the fight against fraud, No. 385, filed on Wednesday 28 March 2018 - http://www.senat.fr/leg/pjl17-385.html)

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www.afd.fr

REGISTRATION DOCUMENT 2018