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EU court’s rejection of French law opens up new opportunity to recover dividend withholding tax

The Court of Justice of the European Union (CJEU) has recently decided that another piece of French tax legislation has breached one of the fundamental EU principles; the free movement of capital.

The breach in question related to the levying of tax on dividends paid to three loss-making Belgian companies. However, had they been French companies, they would have paid no tax in the year that the dividend was distributed. The French tax system did not allow non-resident companies to benefit from the same tax exemptions as French resident companies. This introduced a disparity contrary to the free movement of capital between loss-making companies depending on whether they are resident in France.

Claims for the refund of this wrongly paid tax must be filed no later than 31 December of the year following the one in which tax was paid. Conversely, loss-making French companies taking income from other Members States may also be successful obtaining a refund in light of the CJEU’s decision.

For advice on Tax matters, please contact Graeme Perry, Head of International and Cross Border Tax.