La Revue Squire

Distributions to European parent companies


Rédigé par Philippe de Saint-Bauzel le 24 Janvier 2008

Instruction 4 C-7-07 of 10 May 2007



The tax authorities decided to exempt French stock dividends relating to a participation of more than 5%, from withholding tax, provided they are paid to a parent company that cannot charge it in its country of residence.

Taking into account the consequences brought about by the Denkavit case of 16 December 2005, the tax authorities have decided to exempt from withholding tax, as from 1 January 2007, distributions from companies of which the parent company holds more than 5%, when such distributions made to the parent - registered in another European Member state, or in Iceland or in Norway - are free from any artificial set-up and provided the parent company cannot charge them because of its country of residence’s regulations.

In practice, this measure deals with distributions made to parent companies established in a European country, Iceland or Norway, which do not fall within the scope of an exemption rule (bilateral tax convention or for European companies article 119 ter of the French Tax Code) subject to the condition of holding at least 5% of the share capital and of the current or future impossibility of charging the amount of withholding tax on the taxation due in the country of residence.

This exemption only applies if no artificial set-up was planned in order to solely benefit from the said exemption.






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