News Share

The Tax Hub

Daily Tax Newsletter

France

23 June 2020

Responsive image

French Supreme Court Rules Eligibility for Parent-Subsidiary Directive Correctly Made Conditional on Beneficial Ownership

On 5 June 2020, the French Supreme Administrative Court (Conseil d'Etat) issued its decisions in four cases regarding eligibility for the dividend withholding tax exemption under the Parent-Subsidiary Directive (PSD). The PSD provides, inter alia, for a withholding tax exemption for profit distributions made by qualifying EU subsidiaries to their qualifying EU parents.

The directive specifies that it does not preclude the application of domestic or agreement-based provisions required for the prevention of fraud or abuse. The French law implementing the PSD prescribes that the withholding tax exemption applies if the EU recipient is the beneficial owner of the dividends. Further, it disallows the benefits of the withholding tax exemption if the EU recipient is directly or indirectly controlled by one or more non-EU residents, unless the payer substantiates that the structure was not put in place to benefit from the withholding tax exemption under the directive.

While all four cases are substantially identical, the decision hitherto disclosed publicly concerns the French subsidiary (Eqiom, as a successor to Hocim and an earlier absorbed entity, hereafter Fco) of a Luxembourg entity (Enka, hereafter LuxCo). Fco distributed dividends to LuxCo and abstained from withholding tax on the distribution based on the PSD exemption. Following a tax audit, the French tax authorities reassessed Fco for failure to withhold tax on the grounds that LuxCo was not the beneficial owner of the dividends and, consequently, the distribution did not qualify for the PSD exemption. The tax authorities reasoned that the distribution was made to a Swiss bank account, and that Fco failed to provide any substantive evidence -such as at a minimum substantiated proof that LuxCo is the holder of the Swiss bank account- to the effect that LuxCo is the beneficial owner of the distribution.

Fco appealed the case to the Supreme Administrative Court after both the first level tribunal and the Court of Appeals upheld the position of the tax authorities. In its decision, the Supreme Court equally upheld the position of the tax authorities and ruled that the beneficial ownership condition is a lawful and valid condition for eligibility to the withholding tax exemption under the directive. The decision of the Supreme Court appears to be in conformity with a similar decision of the European Court of Justice of 26 February 2019 (so-called Danish cases decision, C-117/16 - previous coverage).

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More