Publié le 3 septembre 2015 | par Nathalie Mourlot0
Taxation of dividends received by French parent companies: breaking news!
An important ruling has been rendered by the Court of Justice of the European Union on 2 September 2015. A new opportunity for filing a claim for dividends received from EU subsidiaries.
By Pascale Prince, Partner at Denjean & Associés
According to French tax law, dividend distributions received by a French parent company from its French or non-French subsidiaries are exempt from corporate income tax provided certain conditions are met, and in particular that the shareholding is held for a minimum period of two years and represents at least 5% of the share capital of the distributing company. A 5% service charge remains however taxable at the level of the French parent, corresponding to costs and expenses relating to those shareholdings. When the parent company and a French subsidiary are included in a tax consolidated group, the 5% service charge is however not taxable, thus achieving a 100% exemption of the dividend distribution.
Since the tax consolidation regime is only available to companies established in France, the 100% exemption is not available for subsidiaries established outside France and in particular in other States of the European Union.
Further to a litigation initiated by the French company Steria before French courts on the ground that this legislation was contrary to the principle of freedom of establishment, the case was brought before the Court of Justice of the European Union, which rendered its decision on 2 September 2015 (Court of Justice of the European Union, Press Release N° 92/15).
In its decision, the Court ruled that the French legislation at stake disadvantages parent companies which own subsidiaries established in other Member States, and that the difference in treatment cannot be justified. It concludes that such a difference in treatment established by French legislation is not compatible with the freedom of establishment principle.
Following this decision, France will have no other choice but to amend its domestic legislation, i.e. either cancel the relief of the 5% service charge granted to tax consolidated groups or extend the relief to dividends distributed by subsidiaries established in other EU Member States, which would fulfil the conditions to be included in a tax consolidated group if established in France. The government will thus either breach its recent commitment not to increase taxes or suffer a significant loss in its forthcoming tax revenue.
However, in any case, French parent companies are now entitled to claim for the refund of the corporate income tax liability borne on the 5% service charge corresponding to dividends distributed by their EU subsidiaries, until 31 December 2015 for the corporate income tax paid in 2013 (e.g. for fiscal years closed on 31 December 2012) and 31 December 2016 for the corporate income tax paid in 2014. Such a claim will be possible for EU subsidiaries which would have been entitled to elect for the tax consolidation regime in case they were established in France (i.e. minimum shareholding of 95%, same closing date etc…).
Judgment in Case C-386/14, Groupe Steria SCA v Ministère des Finances et des Comptes PublicsFor more information, please contact : Pascale Prince email@example.com
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