Press Room

October 11, 2016

From France: 3% Distribution Tax - The Future Looks Uncertain


Denis Fontaine-Besset - STC Partners, a Member Firm of Andersen Global

The following is an update to the July 2016 Postcard on 3% Distribution Claims Opportunities.

The Constitutional court added a new episode in the series of events announcing the death of the 3% corporate tax contribution on distributions made by French corporations. The results may however not be the expected good news for tax payers.

The Court ruled that the restriction of the exemption of this 3% contribution paid on dividends applicable only to distributions made within the same French fiscal unity was breaching the constitutional principle of equality before taxation. The limited exception will be cancelled with effect as from 1st January 2017 only. Even if the decision seems in line with what was expected, the outcome may well be against the interest of taxpayers. If the legislation is not amended by 1st January 2017, the existing exemption would no longer be applicable! The decision also creates a big dilemma for tax authorities hesitating to increase tax burden on French multinational groups.

The situation is even more confused since there are still pending recourses before the European Commission claiming that the tax is not complying with the European principle guaranteeing the freedom of establishment within the EU. In this context, French corporates shall analyze how to protect their right for claiming back the tax already paid in past years, should it be eventually repealed in the near future.

Please contact Denis Fontaine-Besset at STCPartners for additional information.