Press Room

December 08, 2016

From France: 3% Distribution Tax – The Most Recent Episode of an Endless Series

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


The following is an update to the October 2016 Postcard on 3% Distribution Tax - The Future Looks Uncertain and the July 2016 Postcard on 3% Distribution Claims Opportunities.  

Since 2012, distributions of dividends trigger the application of an additional contribution to the corporate income tax of the distributing company of 3% of any distributed amount. The French Legislation provides for an exception for distributions made between two companies members of the same tax group. Considering that only French companies can become members of the same French tax group, the question was raised whether this exemption could be viewed as discriminating non-French companies with a 95% or more capital link with a French company distributing dividends, but could nevertheless not be members of a French tax group as not being French.

The French Supreme Court recently judged that this exemption is discriminatory and repealed it as in contradiction with French constitutional principle of equality for taxation as from January 1, 2017. In order to preserve the deduction for group members, the French government just announced a project finance bill providing for the extension of the exemption to all distributions made to 95% or more controlling companies whether French, European or established in a country having signed a tax treaty including a clause of mutual assistance for fighting against tax fraud and evasion. If adopted by the parliament, this general exemption shall apply for dividend payments made on or after January 1, 2017.

This positive move is not ending the numerous claims made against the collection of this contribution on the ground of either the EU directives or the constitution or the application of enlarged treaty anti-discrimination clauses.


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