France: Dividends distribution tax is unconstitutional | KPMG | GLOBAL
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France: Dividends distribution tax (3%) held unconstitutional; possible refund opportunities

France: Dividends distribution tax is unconstitutional

The French Constitutional Court (Conseil Constitutionnel) issued a decision holding that the 3% tax imposed on distributions of dividends is unconstitutional.


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The case identifying information is: N° 2017-660 (6 October 2017)

Implications of this decision

Prior decisions of the French Constitutional Court and of the Court of Justice of the European Union (CJEU) have already limited the scope of the 3% tax on dividend distributions or had declared the tax to be in contradiction to the EU Parent-Subsidiary Directive. Litigation is still pending with respect to this tax before the CJEU.

Implications of the recent decision of the Constitutional Court are much broader than the prior decisions. The Constitutional Court declared the tax to be unconstitutional. This completely repealed the tax (and not simply limiting its application) on the basis that the discrimination resulting from the actual scope of the tax was not founded in a reason of general interest (which could have justified the tax) but only by a budgetary objective (which does not justify the tax under French legal standards).

Furthermore, the Constitutional Court concluded its decision would have an immediate effect and would apply to all currently pending litigation. 

Hence, the 3% dividends distribution tax no longer has any legal existence in France.

Possible refund opportunities

Taxpayers have until the end of 2017 to file, with the French tax authorities, claims for refund of the 3% tax on dividend distributions for amounts paid since the beginning of 2015.

KPMG observation

While the French Ministry of Finance has not yet officially commented about the decision, tax professionals with Fidal* expect the French tax authorities would withdraw from any pending cases.

Given the potential cost to the French Treasury of all 3% tax refund claims already pending or that may be filed (the total estimated to be a few billion euros), tax professionals believe it may be likely that the Ministry of Finance could in the very near future, and presumably within the frame of a corrective finance bill for 2017, introduce a new tax or increase the rate of an existing tax to compensate for, in part, the lost revenue that would flow from this decision of the Constitutional Court.


For more information, contact a tax professional with Fidal* in France or with KPMG in the United States:

Gilles Galinier-Warrain | +33 1 55 68 16 54 | 

Patrick Seroin | +1 (212) 954-2523 | 

* Fidal is a French law firm that is independent from KPMG and its member firms.

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