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French dividend distribution tax ruled unconstitutional

French dividend distribution tax ruled unconstitutional

There may be refund opportunities for groups with French subsidiaries who have suffered this tax in the last two years, particularly US parented groups.


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As previously reported in Tax Matters Digest, the French Constitutional Court has recently issued a decision holding that the 3 percent tax imposed on distributions of dividends is unconstitutional. The decision was effective immediately, and as a result, the 3 percent dividends distribution tax no longer has any legal existence in France. There may therefore be refund opportunities for taxpayers in relation to payments of this tax made since the start of 2015. In order to be eligible for such a refund for tax payments made in 2015, it will be necessary for a claim to be filed before the end of 2017. Claims may be filed in 2018 for tax paid in 2016 and 2017. 

This will be relevant for any group with a French subsidiary which has suffered the 3 percent tax in the last two years. However, this is likely to be of particular interest to US parented groups with French subsidiaries as a failure to claim a refund could impact their ability to claim foreign tax credits (FTCs) under Section 901 of the US tax code. Section 901 prohibits the claiming of FTCs in certain instances where the taxpayer has voluntarily paid the overseas tax – and failure to claim a refund could be considered as voluntarily paying a tax. 

It is anticipated that the French Government will receive a large volume of claims for refunds of tax. Therefore as a practical matter, there is likely to be a long lead time for the processing of these claims and taxpayers may not obtain resolution on their position for some time.  

Further details of this decision can be found in this KPMG Tax News Flash. If you would like further information on this matter, or assistance in understanding how it may apply to your group or filing a claim, please get in touch with one of the below contacts:

For more information please contact:

Matthew Herrington

Gilles Galinier-Warrain

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