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4.4. Branch Profit (Deemed) Remittance Tax

The after-tax income of the French branch of a foreign company is deemed to be remitted to the foreign head-office and is subject to a branch tax at the rate of 28%. From 2018, the rate is aligned with the standard corporate tax rate, resulting in branch remittance tax rates of 28% in 2020, 26.5% in 2021, and 25% from 2022 onwards.

The presumption of  remittance to the foreign head office  is rebuttable. Hence, part or all of the branch remittance tax paid may be reclaimed if the taxpayer proves that the total amount of dividends distributed by the foreign head office during the following 12 months is lower than the profits remitted from France, or if it can be evidenced that distributions were made to French residents. Moreover, various French treaties provide for an exemption from or a reduction of the branch profit tax.

Further, the branch tax is not due if the foreign head office is located in the EU/EEA and is subject in the country of residence to income tax with no possibility of opting out or of being exempt. Effective from 1 January 2020 and in order to adapt French regulations to the Supreme Court’s 2019 decision in the Cofinimmo case, the branch remittance tax may also be (partially) reclaimed if the head office is in an EU/EEA country and the taxpayer proves that the after tax profits of the branch have not been divested. The modalities of determining the non-divested part are yet to be clarified. The relaxation is only relevant to EU/EEA taxpayers who do not meet the tests for the standard branch remittance tax exemption for EU/EEA residents as outlined above.

Note that dividends received by a French permanent establishment and benefitting from the participation exemption may still be liable to branch remittance tax when deemed remitted to the foreign head office.

Finally, a 3% tax on distributions made by French companies (subject to exceptions) also applied to remittances of after-tax profits to foreign head offices. However, the tax was discontinued from 1 January 2018 after having been struck down by two rulings by the European Court of Justice and the French Constitutional Council, respectively (see Sec. 8.2.3.).