On 26 January 2018, the French Conseil d’Etat (administrative Supreme Court) issued its decision in case 408561 concerning the documents that can be used to justify the payment of a withholding tax (WHT) in France when reclaiming a refund of this WHT.
A Belgian-resident individual invested in French shares and subsequently received dividends in 2010, 2011, and 2012. Those dividends were subject to the French full domestic WHT, which ranged from 25% to 30%, depending on the tax year.
The taxpayer requested a WHT refund a posteriori, based on the France-Belgium double tax treaty (DTT), which provided for a reduced WHT rate of 15%. However, he was not able to provide documents from his French paying agent proving that the French WHT was effectively paid, at what date, on which dividend payments, and for which amount.
On this basis, the French tax authorities, as well as the first and second tier French administrative courts, denied the taxpayer the rights to obtain a WHT refund. Accordingly, the taxpayer filed an appeal before the French Conseil d’Etat.
The opinion of the Conseil d’Etat
The Conseil d’Etat commented that, based on the French tax procedure code, a taxpayer has to attach, to a WHT reclaim, a document from his/her French paying agent proving that a WHT was effectively levied and with information on the payment (date, gross dividend, WHT amount, and other details).
However, it can happen that the taxpayer does not manage to obtain such a document in spite of his/her efforts. In this case, he/she can provide a bank statement or any equivalent document issued by a financial intermediary, indicating the ISIN code of the shares giving rise to the dividends, their date of recording on the bank account, the date of payment of the dividends, and their gross and net amounts. This should be sufficient for the tax authorities to identify the distributing company and request additional documents if needed.
The Conseil d’Etat, however, also stated that this exception only applies when the financial intermediary is located in a jurisdiction which has concluded a double tax treaty with France that contains an administrative assistance clause.
In the case under review, the Conseil d’Etat denied the rights of the taxpayer to obtain a WHT refund, as he did not prove that he diligently tried to obtain the necessary documents.
KPMG Luxembourg comment
This decision is good news for taxpayers seeking to reclaim WHT in France, either based on double tax treaties or on EU Law.
It should indeed leave room for more flexibility when a taxpayer is not in a position to obtain the necessary document from his/her French paying agent (i.e. reference to certificate 2777). In such a case, he/she should be able to show that all necessary efforts were undertaken to obtain the documents requested by the French tax authorities.
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