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Withholding tax on dividends increased to 30% - 02/01/2012


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On 28 December 2011 the French Constitutional Council (“Conseil Constitutionnel”) issued its decision on the Rectified Finance Bill for 2011 (“Loi de finances rectificative pour 2011”) previously approved by the Parliament. The Bill has been published in the French Official Gazette (“Journal Officiel”) dated 29 December 2011.

Pursuant to a provision (not censored by the Constitutional Council) of the Bill, the existing withholding tax rate of 25% is increased to 30% on dividends paid by French companies as from 1 January 2012, unless this rate can be reduced in application of double tax treaties or the Parent Subsidiary Directive.

Please note that Luxembourg SICAV/SICAF and FCP do not benefit from such potential reductions of the withholding tax rate and should suffer a 30% withholding tax unless they are successful in claiming against this tax based on recent decisions from the European Court of Justice (see notably our Operational tax news dated 9 June 2011 on French developments).

The Bill provides for additional withholding taxes increases as well:

  • Withholding tax on interest derived from bonds issued before 1 January 1987 increases from 10% to 15% (and from 12% to 17% for bonds issued before 1 January 1965); and
  • Withholding tax on securities’ income paid to residents of non-cooperative jurisdictions increases from 50% to 55%.

If you have any queries regarding the above, please do not hesitate to contact us.

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