EU Commission Requests France To Abolish Certain Withholding Tax

The European Commission released its “May infringements' package: Part 1: key decisions” including Commission’s request to France to abolish withholding tax imposed on non-resident companies in deficit.

Free Movement Of Capital

According to the Commission, France should abolish a withholding tax that applies to dividends received in France by companies based in other EU or EEA (European Economic Area) States. By applying a withholding tax on such dividends, the French authorities are failing to fulfil their obligations regarding free movement of capital.

Immediate Taxation

The Commission informed that the withholding tax leads to immediate taxation, without the possibility of a refund of the dividends paid to an EU and EEA company in the following situations:

  • When the company is in structural deficit, even though French companies do not pay this tax in comparable situations;
  • When the company is in a temporary loss-making phase, even though French companies facing the same difficulties are subject to taxation only when the firm regains its surplus.

An amendment of the legislation adopted by France at the end of 2015 applies only to non-resident companies facing both deficit and liquidation. If the French authorities fail to respond to this reasoned opinion within two months, the case may be referred to the Court of Justice of the EU, the Commission warned.

Source: European Commission

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